Transcript
This is proxy countdown. Welcome to the Big Show for the week of December 18th. Alongside my tag team partner. Matt mascardi. I'm Damien Rallis on today's run on today's countdown. Another CEO is going to jail. Boo two notable pre-Christmas golden hello again awards for CEOs that sell radios and tasers, the ongoing proxy cage fight at Disney, lazy shareholders at 1 800 Flowers and a big vote at America's second. Most folksy company. We'll start with our trade wire top stories. Nicolas Nicolas, Nicolas, Nicolas founder, former CEO. Trevor Milton was sentenced to four years in prison for defrauding investors. Of the electric and hydrogen powered truck. Maker Milton was found guilty last October on two counts of wire fraud and one count of Securities fraud. So Matt it's not just women going to jail for fraud Perpetual though. It was Milton's lawyer. Who blamed Elizabeth Holmes. Who said, Trevor Milton is not as bad as Elizabeth Holmes and that's why he shouldn't he should get a lighter sentence. That was Milton's lawyer last week, the Nicolas board appointed Johnathan Perchick CEO of Travel Centers of America. He a Milton antidote or something. I wonder if the timing is significant. He's not a Milton antidote. In fact, what he what he is. What it is, is pure discrimination on the part of Nicholas board. And this is discrimination against dudes with hair Steve gersky. Who's the CEO, who took over for Milton, he has 51% of the influence. He bats an all-time low of point zero six two overall point zero. Six two point, five zero zero is the average director, 500 batting director. He actually was the funder behind the fraudster milk, and he won the lottery. Getting to run this company, as Milton goes to jail, but it turns out he's straight up racist against hair. Not only is this board 88% male. They only could find one woman to put on the board, but it's 63% bold. In the academic research, actually shows that people bond with people who look like them faster and gersky took that to heart. He's only looking for bald men to add to the board and John perchick fits the bill. Can we just find one woman to break up the bald Boys Club here or just a man with beautiful hair? Either way, I'll settle and another tough story. Sadly, another director has died. Tecogen board member Fred hollabaugh. In new directors, Johnson, and Johnson added Best, Buy director Eugene Woods. Union Pacific appointed former army colonel and Deputy Secretary of Homeland Security John Tien. So think twice Matt, if you're planning a big train robbery, Heist is off, my Heist is off Hyatt hotel's appointed Bath and Body Works director Alessandro bogliolo Alessandro is the former CEO at Tiffany's, this guy just oozes soft skin and high thread counts and blood diamonds. Really the wow, the luxury, man! Right there all sunroof you put him on the hi. I'm going nowhere. But Hyatt now I'm just gonna roll around and rubies, and finally lied, dose Holdings, appointed FedEx direct and retired. Vice admiral Nancy and Norton. So two military former military people appointed to a boards at Fortune 500 companies. I will say this about that. I was told by an Insider that when you see a military person on the board, if it is not a defense manufacturer of some kind, the reason why they're adding them is there a guaranteed rubber stamp vote for the CEO. These are not people who are there to make waves. They're there to effectively say thank you. And be a part of the process. Now that might be unfair, but that was told to me by an Insider so I'm always dubious of it in executive changes. HP is making a switch at CFO replacing Marie, Myers with. Tim Brown, Marie lasted, less than three years. Matt average CFO tenure in the Fortune. 500 is less than five years. Which is probably not a good sign. If you're a succession planner Angela Armin is the new CEO. A killer Roy Realty. On top of a welcome package. That includes four million dollars. She's receiving 15,000 dollars per month for temporary housing. 200,000 dollars in relocation fees and it's a new one to me, quote, any deposits or tuition for private schools, for her children for the current school year, that cannot be recovered and quote. Wow. It's very specific. Yeah, it's I mean that and that negotiation was what my kids are already enrolled in the school. I can't get the money back. Can you refund me for it? But we're talking about, she just got a 4 million dollar, welcome package the 20,000 dollars. You spent to send your kid to private school. Seems like the least of your concerns. Doesn't it? Former CEO and the Founder's son John Kilroy Junior will remain as chair. So have fun with that Angela. Okay, John Junior, bear with me. Matt will receive a 92,000 dollar a month consulting fee until the annual meeting and then we'll receive 80,000 dollars per month Consulting. If you don't you just done, don't you love the needless Precision there? Also, I like this, the monthly consulting fee will increase by 15,000 dollars in certain circumstances where John Junior no longer receives administrative support from the company. So does that mean if he administrators, right? So if he loses access to the fax machine they'll give him 15,000 dollars in cash. Yes. Somebody like no longer transfers his calls for him, they get the extra 15K. Wait, there's more John, junior is also getting a 16 million dollar golden parachute and he will get 70,000 dollars more, just to stay on the board until the meeting. After the meeting, he will receive full director pay, which is about 300,000 dollars all this despite currently holding about 70 million dollars in company Equity, I'm exhausted. Wait a minute, back that's struck up. He's getting 70,000 dollar retainer to stay hang around until the meeting around but he's also getting a 92,000 dollar month Consulting. Absolutely. Until the meeting where he's still gets 80,000, what's the retainer for? What are we took? What are we paying for? What kind of performance are we getting at this guy? This is why you should take the data seriously of who controls influence on the board. John Junior, the founders son controls, 50% of the influence at killer, there it is and there's your answer and a booking Holdings. They have a new CFO e watt Steenburgen, he's getting a golden. Hello of 9 million dollars in equity, 1 million dollars in cash just to show off. Let's just say, if CFOs are turning over at the rate that you're saying, and less than five years, a golden, a low for CFO seems like a pretty bad deal. Well, not recouping that money. I don't, if you notice the average tenure of a CFO and the Fortune 500 is about the period about the vesting period for most of these golden HALO Awards, about five years, cash out, baby, cashing cash out. There's like player transfers in the NBA other notable board, resignations include board chair. Robert spurring at mettler Toledo, Bob is a powerful dude. In our database, he controls 41% of bored influence up by Vice tronic. 37% Mendler Toledo in 21% of Nova, former PayPal CEO. Dan Schulman has left the building, current CEO. Alex Chris can wear whatever he wants now to the board meeting's. According to reports, the PayPal board bungle. This is Actually, the succession process, which officially began last January when Dan Schulman announced his retirement, but he is gone, he's off the board. Completely gone from the company. And finally, Catherine. Minyard. Stepped down at ovin Tiff. She's been on the board for two years, but something tells me that what she saw our data, and the fact that she controls 0.2% of influence, she suffered an existential crisis. Yikes 0.2%. And finally in our trade wire we got a few money stories to relay. It's golden. Hello again season. So Matt a golden hello Awards. What you get when you were hired a golden. Hello again which I think Paul Hodgson coined the phrase is when you just say hello again with more money for no apparent reason. So A Serious XM radio CEO Jennifer wits is getting 17 million dollars in options. Three million dollars restricted shares 13 million dollars in performance shares she's getting use of a company car she's getting 30 hours of jet use and she's all. So getting a raise man up to two million dollars in base salary. I again, she's already been CEO. This is just a little extra something for Jennifer wits and Is a company that makes tasers? CEO Patrick Smith received a one-time Grant of 100 worth 150 million dollars in something. I've never heard of before something called exponential stock units, xsu. So he's getting 150 million dollars. Just first sticking around excess use were modeled after Elon Musk ape package from 20. What was that 17 2818? So basically now we're modeling PayPal packages for someone who makes tasers after the richest man in the world. Let's move on to our proxy cage matches. The big news this week comes out of the proxy battle at Disney versus Tryon. Tryon. Finally announced its nominees to Disney's board. Two nominees first. There's dry ends, own founder and CEO Nelson Peltz. And then there's Disney's former CFO Jay rasulo. So, so two nominees to the board there at Disney. Look, this is the ultimate troll to Eiger. There is nothing more trolley than this, these picks. Right? First of all, Pelt said he has a quote, unparalleled performance. As a director, he is literally paralleled according to our data, he bats overall point, 501 he bets 501, the average director bets 500, he is the average director even as TSR is 537 which is almost exactly. Average Pelt should be busying himself from moving his son from the Wendy's board before tossing out things like, quote leadership succession as one of his core skills. This is not, he's not putting on an All-Star performer. What he is, is an activist putting himself on that's what that is. Meanwhile, rasulo, who is the second Jay rasulo? Was Disney's former CFO rasulo stepped down, or was pushed out after He was passed over. For either succession planning in 2015, in fact, rasulo was replaced by Christine McCarthy who's now left Disney, but who staged the coup against Bob chapek and brought Eiger back this. In the past year, this is a troll by pelts the losses in and streaming and Disney's losses and underperformance in in movies, the linear television losses. Rasulo is background, was in Parks, not in any of those things, and he was chafing before. There was Chapin, says he wants to quote, get back to the way it was. But totally ignoring the fact that Netflix exists now and ESPN used to be a cash cow, but no one watches TV anymore and Disney's big innovation at parks at the time, was a wristband that allowed you to wait for three hours for ride. So four, this isn't about performance Savvy. This is about a guy that I got passed over. Who probably is still sour grapes about it. Getting put on a board by an activist. He could have named anyone, he could have found someone on the Netflix board you could have found someone like Jack ma he could find someone in AI or or Tech imagine if he reached out to the apple board and said you guys are using the Vision Pro. Disney's gonna make that a centerpiece of our of our of our deep diving experience of the few know what he wants is a blast from the Michael Eisner past. This is the stupidest Bunch like of activism. I've seen, he had a chance to do something pretty cool here, but now, I'm voted against pelts voting against them. This is not great. Let's move on to our vote results table. True, stories to update you, let's start with a company. We talked about last week, Paulo Alto networks, where ISS and glass Lewis were targeting pay. And glass Lewis was also targeting directors, aparna Bawa, and Lorraine twohill, two women there. So here are the results from that vote say on pay failed decisively only 38% of shareholders said yes. However, both of the directors, targeted by glass, Lewis re-elected with about 86% of the vote. Quick question for you. Did the anyone on the pay committee, get a negative vote I believe that. No, I mean, one of those women was on the pay committee. So but show whichever it is. She got about 86% of the? Yes, vote. So we hate the pay but love the people who said it, only four directors up for vote at Palo Alto networks. They have a classified board and one I want 100 flowers. Shareholders have decided. They are either too busy or don't like to be bothered or both as they had decided to punt their annual say on pay vote to every three years, a full 95% of shareholders at 1-800 Flowers, have decided that reading the companies pay report every year is just too much of a burden. I mean, it's really hard to, you know, read the What 700 words about? Do you approve, pay? Or not every year. It made me think about my own life. What am I doing? I read these. I read these paper reports daily. I don't know why they can't once a year. All right. Let Matt, let's move on to the big boat. Company in Focus today is what I'm calling potentially America's second. Most folks company there Berkshire Hathaway without a doubt at least until Warren Buffett dies is absolutely. America's darling. Folksy is company. In fact, they are so true to who they are that even when you go to their website, it is it is not a website. It looks like it's from 1974. It is basically 17 hyper links that that so true. They are to their folksy Roots, but Costco might not be far. Behind, Costco has an annual meeting. Coming up January 18th, 2024, Before I asked, Matt what he thinks about the board, let me give you a few highlights. Uh, no big ownership people to know about here at Costco Vanguard controls 9% BlackRock 7%, but there's no one else other than that. Overall, you talked about performance with some of the other companies today. Overall, Costco bats, 389, which is low right below the average of 500, average. Sure, what really stands out is earnings where they're hitting 166, however, and shareholder. Return was the interesting part. They actually hitting 624, which is high So it's strong, they tell a good story at Costco and it clearly has an effect on the market. There is a big CEO succession happening at Costco, CEO, Ron vakrasana. 300 pound jars of pickles. It is Grandpa's cheap bulk Goods Warehouse. That's what it is. Firmly ensconced in a brick and mortar world, right. I don't believe they even have a online retail that I know of. Well, they were at. They do have e-commerce and it does bring in some of their money. And in fact, the skus that they have, they I think they had 14,000 and earnings call. They had 14,000 products, effectively. They're selling through e-comm and only four or five thousand in store. So, they've fastly, like there's selling vastly more products online, then in store, but the online experience is effectively the online experience from Amazon in 2004. I mean, we they have an advanced by Charlie Munger. I think Munger was on the original coating team. They don't have plans to reduce, but they are heavily brick and mortar. The vast majority of their money comes from the brick and mortar, and they don't have Plans to reduce energy costs 79% of their warehouses. They own and property is the largest, the largest single largest asset on their balance sheet is property. And they don't have any real plan to reduce the energy cost of those warehouses. This is a company that mints cash by selling Rubber Chickens, they are inflation protection for customers who are whenever there's a recession or even the hint of verse session or prices, go up. What do you do? You go to Costco and you buy in bulk just like you go to McDonald's. Treaty loyal fan base. I will say about Costco. And there, as part of that they're selling cheap gas that consumers don't actually realize they are subsidizing with the cost of their subscription plan so it's not exactly cheap gas. They're you sell exclusivity to the club that offsets the cost of the cheap gas and the cheaper bulk items, right? So Costco isn't vastly different from Walmart in that respect except they have exclusivity going for them. What makes them different is while Walmart is a family run firm and you think of The Waltons, you don't know who to think of at Costco. The who is what makes a difference. And this is why Munger loved them, because it's actually not a company run by their CEO. It's run by their long-time CFO. Richard galanti The CEO doesn't even show up to the earnings calls anymore. Like it's only galanti all year. It's been glancy doing it. Galante has been on the board since 1995, since the Clinton Administration, he's 28 year tenure. He second only to Hamilton Tony James who has a 34-year tenure on this board. Yeah, he's a chair Hamilton. James is the chair. He was formerly the lead independent director, but on the board since the Since Bush, senior Administration, here is an exchange, if you want to know how the board thinks, how galanti thinks and they and they move. This is an exchange, I'll quote from an earnings call. This is their March earnings call, this is Costco's view of the future, Scott mushkin, who's an analyst asks and just curious and maybe this is a silly question. What happens with the gas business? Especially in California with the push to EVs and Richard galanti the CFO been there. For 28 years says, it's a long road ahead. We only have 11 car washes so we have plenty of room for car washes, 30 years from now, but at the end of the day, we think it's a very long road, it's not happening in the next few years and the fact that we're still taking such market share relative to us, gas gallons in general is a positive. So I think it's a question that we can defer for five or ten years, frankly. That's how they're thinking. Maybe I'm sucked into the folks of all this man. I find it hard not to love Costco, buy everything you're telling me. I in fact, we would say just yesterday that I don't think that CEOs should be allowed to dominate their boards here. And you're telling me this is a board not dominated by its CEO. Well, it's also I think it's screws with like, our stats a little bit. Okay. I I measured the old school influence on this board, and this is all the directors who've been there for, at least 10 years, Tony, James, 34 years. And his name is Hamilton, I have, but he goes by Tony like Hamilton Tony, Tony James galante 28 years, Munger who just died was there for 26 years. Sue Deckers been there for 18 Jeff raikes for 14 and I could have been there for 13 years. That's old school influence of 52% of the board. Effectively the Old Guard, right? Who's largely insiders are controlling the majority of the way. This this board runs that doesn't even include the new incoming CEO, backrest who will go from a low percentage of influence because he's on the board. Currently two a much higher as a CEO, our stats fell because we think Mary Wildlife water is the single most influential person on the board. Well, For potentially, for good reason. When you say Maggie Wilder, she is a director of directors hear yourself. Here is some of the she's currently director, at Sana biotechnology, and she's chair at DocuSign, she was formerly CEO at Frontier Communications. Matt, she held directors ships, at Xerox, Dreamworks Animation, Cadence Design, Hewlett, Packard Enterprise Procter and Gamble company in lift. This is a well accomplished director who literally knows every director in the universe. And let me ask you something. The companies you just Listed include. Like these. What can we think of any older School companies? And these companies the the thought methodological Procter and Gamble and that's another one she sat on the thought Frontier Communications literally deals in like they're the only ones hard-lined wires still phones like these are some of the oldest like institutions its Ma Belle, I mean we're talking about like the the mid late 1900s is where these companies come from that. The director said on, we do know this. So we do know that the community concentration of these board members, meaning it, you know, when you go on LinkedIn and it says, you know, Jim you probably also know Jane, we use that same math on the directorships across the entire globe of directors. We know that 91% of the directors on this board belong to the same Community. Only one sits out of the and that's John Stanton. We know that 45% of the board is connected to One another through first or second degree on other boards, we think that this board type is democratic, but we know that it's differential to management. Giving the power of galante on this board, he has lived through, this will be his third CEO in his tenure. He's been CFO almost the entire time with these three CEOs. We know that 79% of the players on the sport are rotation players. They're not actually High performers. And we know what they do really really well. These directors pay dividends, they bet 827 paying dividends, they are some of the biggest dividend payers of any directors in our database and they also like paying the CEO 336. They're high-paying directors. Those are the two things they do. Well, dividends and CEO. They are greasing the palms of shareholders and management. And the result is there are crushing for TSR. They are crushing every competitor. But here are my game time picks for the board, that's picks for who you should vote in, vote out. First of all, Hamilton James, if I can't get over the that is nickname is Tony. It's like four chair, Tony James. Yeah, if you like nicknamed King, Charles Little Chucky, right? Like Hamilton James, he went to Choate Harvard, he's an investment banker. He was at Blackstone, he's the trustee of every New York City institution. He's worth 3 billion dollars, he's going with Tony Tony James, come on street cred, Tony, you targeting Tony James to vote out. He's been on the board again since George Bush. Senior. I know the board like to keep it OG, but 38 years for a non-founder. A non-founder is incredibly rare. It's time to vote against his time. Notably might be one of the few directors, not tied to the Seattle area, correct, which is my second recommendation. Seattle royalty rules here. This is an Issaquah base, which is a city outside of just outside of Seattle. It's a quad bass company 4 6% of the influence on the board is seattleites. Either they live. There they are. They have their names on buildings, there, they're on boards there. They are heavy Democratic donors, baseball, teams, the Seattle Mariners. They actually own the Mariners. Sally Jewell was interior for Obama, Tony. James is actually an Obama donor was offered the Commerce Secretary role and there's three Insiders on the board whether or not, they meant money break up the guaranteed votes of the Seattle royalty and the Insiders, I think you vote against jelenic, the man was the CEO. We do not need no and ex CEO, a current CEO, a 38 year, 10 year, share a 30 of 28 year 10 year CFO on the board. Get rid of somebody people but again and again Tony James and Jonah. Anybody else? That's my picks. Okay. Get them off. All right. That's that's the board. The board vote there, a Costco, let's move on to say on pay. Matt, the most notable 95% said yes in 2022 you made some reference to CEO pay. But can I just tell you this to again? This is maybe all the proof you need for why? This is the second most folks he company in America The compensation discussion analysis section at. Costco. It does it barely exists then. Yeah it's number one, pure company listed in the proxies at Walmart. Walmart their discussion runs over 30 pages of At Costco, that's it's five pages and and there's no, no charts, no nothing. It's just, it's just some bland folksy. Pay talk. That's it. The entire proxy is like that. We want to know who's on the Committees. You have to read like the paragraph part. Says, it's part of the text, right? It's part of the narrative and its 20 203 and I will say this that whatever the formula is the average pay over the last three years for Craig has been about 12 million dollars. The average pay for Walmart, CEO, Doug McMillan has been about 25 million dollars. So hey the folks in this might be working a little bit, don't gloss over the fact that the jail and it has 258 million dollars worth of shares that vest on his retirement. I'm not sure he's exactly hurting for pay and I think they're making it another ways and to add to the folks that pay at Costco. I will say that all the named executive officers at Walmart receive corporate jet benefits at Costco. Their big benefit was 120 dollars for an executive membership card. This don't be fooled by this. See this, what's your say? Okay Matt what's your vote on Page? Look, I'm voting for pay. I'm voting for pay mostly because like there's that if you're an investor in this company, they have given you exactly what you want. Which is the TSR and you are getting much more from other other Executives, right? So like you vote for in this case, but don't fall for this folksy bulshit, oh 120, dollar executive membership card but 258 million dollars worth of shares that vest when he retired, honestly, honestly change where I disagree with you, as I think the folksy bulshit at Costco is the narrative is driving, its high shareholders return. Great. It's driving, it's working, but but I'm saying investors, you're smarter than that stupid narrative don't buy. The fact that all he gets is 120 dollar executive membership card. Even our number even our number one anti-consumer in our office, Janet Jesse the money Whisperer. She talked to me about for an hour yesterday, but how much she loves cost go? I don't get it. I don't get, I don't understand, everybody loves finally, there is a another, there's The anti-walk anti-esg, share the proposal up for vote at Costco's meeting in January. This is from our friends at the national Center for Public Policy research. It has one of the stupidest names for proposal. I've seen recently fiduciary carbon emission relevance report fiduciaries in there though. Yeah, exactly. So what do you think about this, Matt? What are you voting on this anti-esg? Proposal look dates is an easy vote. Again, this is a stupid shareholder proposal as one of the best circular arguments of all time. Ah, here's it, here's what they say. They that claims about the need for decarbonization at all, especially by some blah blah blah. Our base on Long series of assumptions that are either counterfactual or insufficiently examined, so they go first again, to the need to decarbonize for decades. For instance, claims have been made that action must be taken before some date, or it will be too late if those claims are right, it's too late for decarbonization to matter now. So we should be building up economic resources to deal with Climate change if they're wrong, then the odds are high that current claims are also wrong. So basically, they're saying, like you should do nothing because if we're right, it's too late, and if we're wrong then we were always wrong, right? It doesn't matter. The board actually said this, though. This is my takeaway. When you have a board full of people who have been there since the Bush Administration we're seeing it. I think about climate change, they said, quote the board in the company also have noted that the plan and this is meaning their carbon reduction plan and others like it will not now prevent the impacts of global warming which every day or more evidence. The world is now instead in a state of attempting to mitigate and adapt to these impacts the reality that reality however means that efforts should be enhanced. Notably we lost, we lost, we lost the climate change, voting vote again, that's it. That's let me wrap up. The cost, go vote recommendations, and then Will wrap up the show, Matt says a vote against chair. Tony James and former CEO as they'll be former CEO as of next week after the, after the New Year's. That's Craig jelenic, Matt. Voting yes. On say on pay and a big no against the anti-wolf anti-esg shareholder. Proposal from the national Center for Public Policy research. That's the proxy countdown for the week of December. 18th 2023. Join us next week. I believe when we jump back into the alternative democracy pool Forever on the lookout for shareholder sharks floating Band-Aids and Wayward corrected.