Council of Institutional Investors

Meetings to Watch
Thursday, May 7, 2015
by: Rosemary Lally and Matthew Frakes

Section: CII Governance Alert




May 13
Service Corporation International—The International Brotherhood of Teamsters submitted a proposal asking the company’s board to adopt a policy that requires senior executives to retain a significant percentage of shares acquired through equity compensation programs until reaching normal retirement age or terminating employment with the company. In its supporting statement, the proponent says only one-third of the company’s executives' annual equity grants are tied to a longer-term performance goal which may not foster a strong focus on long-term performance. In opposing the proposal, the company’s board says it believes that its stock ownership guidelines and its performance-based compensation plans and policies successfully strike this balance, while an "inflexible anti-diversification mandate” inherent in the proposal could be harmful in several respects and put the company at a significant competitive disadvantage for attracting and retaining executive officers.

May 18
Omnicom Group
— The New York City Comptroller filed a proposal requesting that the company publish a report with its diversity policies and the racial and gender breakdown of its employees. The supporting statement asserts that increased diversity will lead to a boost in long-term value creation, and enhanced disclosure would allow shareholders to better determine the effectiveness of the company’s diversity policies. The company argues that it currently undertakes several initiatives to promote diversity in its workforce and that the data requested for disclosure would not be a reliable means of measuring the effectiveness of these initiatives.
John Chevedden submitted a proposal requesting that the company adopt a policy requiring the board chair be an independent director.

May 19
Continental Resources
—The Central Laborers’ Pension Fund submitted a proposal asking the company to adopt a policy requiring the board chair to be an independent director. The supporting statement argues that having a CEO serve as board chair would not afford enough protection for shareholder interests, even with a robust lead director position as well. The company argues that a flexible approach to the board leadership structure is in the best interests of shareholders, especially with the current CEO’s vast experience in founding the company and the fact that every other director is independent.

Morgan Stanley—AFSCME submitted a proposal requesting that the company report on its lobbying policies, procedures and contributions. The supporting statement asserts that the company’s current disclosure is insufficient, as it does not cover its payments to trade associations or to influence legislation at the state level. The company argues that its current level of disclosure is sufficient, that the requested additional disclosure would be an inefficient use of corporate resources, and that its current political contributions are subject to oversight from management and the board.

The AFL-CIO Reserve Fund submitted a proposal requesting that the company report on the vesting of equity-based awards to senior executives who resign to enter government service. The supporting statement questions how the company and its shareholders benefit from a compensation plan not tied to executive performance that incentivizes top executives to leave the company. The company argues that its practices enhance its ability to attract top talent for executive positions and that its current proxy statement disclosures already include detailed information on the equity awards of certain executives that would vest upon their leaving for government service.

Investor Voice and Boston Common Asset Management filed a proposal asking the company to amend its bylaws to make all matters other than director elections subject to a simple majority vote of shares voted “for” and “against,” excluding abstentions.

Southwestern Energy— The New York City Comptroller submitted a proposal requesting that the company adopt proxy access. The proposed access mechanism would allow holders of at least 3 percent of the company’s common stock for at least three years to nominate up to 25 percent of the board. The supporting statement asserts that proxy access is a fundamental shareholder right that will increase accountability and shareholder value. The company argues that any shareholder holding at least 3 percent of the company should have the resources to solicit proxies on its own, that proxy access would allow director nominees to bypass the rigorous selection process conducted by the board, and that dissident candidates elected via proxy access could fracture the board and increase the influence of special interest groups.

John Chevedden submitted a proposal asking the company to allow a shareholder or group of shareholders with at least 10 percent of the company stock to call special meetings.

May 20
PPL
— The New York City Comptroller submitted a proposal requesting that the company adopt proxy access. The proposed access mechanism would allow holders of at least 3 percent of the company’s common stock for at least three years to nominate up to 25 percent of the board. The supporting statement asserts that proxy access is a fundamental shareholder right that will increase accountability and shareholder value. The company argues that proxy access would bypass the board’s process for identifying and recommending qualified nominees who would serve the long-term interests of shareholders, that it could result in additional costs for the company, and that it could discourage qualified director candidates from serving on a potentially fragmented board.

The New York City Funds filed a proposal asking the company to report on its political contributions policies, procedures and actions. The supporting statement argues that enhanced disclosure would increase accountability and protect long-term value by allowing shareholders to fully evaluate corporate political spending. The company asserts that it already provides investors with a comprehensive report on its political contributions and that additional disclosure would be duplicative and would incur unnecessary costs and administrative burdens.

The New York State Common Retirement Fund submitted a proposal requesting that the company report on its plans to reduce greenhouse gas (GHG) emissions. The supporting statement asserts the need for the company to meet the goals set forth by the Obama administration and the U.S. Environmental Protection Agency’s proposed Clean Power Plan. The company argues that producing a report on issues related to the EPA’s plan before it is finalized would not be an effective use of corporate funds or in the best interests of shareholders.

William Steiner filed a proposal asking the company to adopt a policy requiring the board chair be an independent director.

May 20
CenturyLink
—The International Brotherhood of Electrical Workers pension fund submitted a proposal asking the company’s compensation committee to adopt a policy requiring senior executives to retain a significant percentage of shares acquired through equity compensation programs until reaching normal retirement age or terminating employment with the company. The proposal recommends a share retention percentage requirement of at least 75 percent. In its supporting statement, the proponent says the company’s current share ownership guidelines do not go far enough to ensure that the company’s equity compensation plans continue to build stock ownership by senior executives over the long term. The company’s board opposes the proposal, arguing that its stock ownership guidelines, combined with its performance-based compensation, strike a more reasonable balance than the requirements in the resolution. Similar proposals came to shareholder votes in the past three years and received the support of about 27 percent of the votes cast.

The Travelers Companies—The New York State Comptroller filed a proposal asking the company to provide additional information on its trade association memberships and payments, and additional information on related oversight mechanisms. In its supporting statement the proponent says the company has contributed at least $4.9 million in corporate funds since the 2002 election cycle, but a complete picture of contributions is not available since Travelers does not disclose its trade association expenditures. In its opposition statement, the company says it discloses on an annual basis corporate contributions to states, local candidates, candidate campaign committees and 527 other organizations. In addition, the board reports that it has not made any direct, independent expenditures and has no plans to do so in the future. This is the sixth time Travelers has received a similar proposal. Those proposals received shareholder support ranging from 29 to 40 percent of the votes cast.

May 21
NextEra Energy
—The New York State Comptroller submitted a proposal asking the company to report on its corporate political contributions and trade association expenditures, as well as related policies and procedures. In its supporting statement, the proponent says the company has contributed at least $4.8 million in corporate funds since the 2004 election cycle. In its response opposing the proposal, the company says it participates in the political process to ensure that public officials are informed about key issues that affect the company. It also argues that the additional disclosure would make it easier for competitors to discern the company’s public policy and political strategies.

NextEra Energy shareholders also will vote on a proposal filed by Myra Young asking the company to amend the bylaws to give holders in the aggregate of 10 percent of outstanding common stock the power to call a special shareholder meeting.

Level 3 Communications— The New York City Comptroller submitted a proposal asking the company’s board to adopt proxy access. The proposed access mechanism would allow holders of at least 3 percent of the company’s common stock for at least three years to nominate up to 25 percent of the board. The supporting statement asserts that proxy access is a fundamental shareholder right that will increase accountability and shareholder value. In its response opposing the proposal, the company’s board says it will implement an appropriate, reasonable form of proxy access even if this proposal is not approved by shareholders. The company says the 25 percent board nomination limit is too high and the 3 percent ownership requirement is too low.
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