Council of Institutional Investors

Meetings to Watch
Thursday, May 14, 2015
by: Rosemary Lally and Matthew Frakes

Section: CII Governance Alert




May 19
Community Health Systems
—The UAW Retiree Medical Benefits Trust filed a proposal asking the company’s compensation committee to amend its clawback policy to provide that the committee will review and determine whether to seek recoupment of incentive compensation in cases of misconduct and disclose the circumstances of any recoupment. In its supporting statement, the proponent says the company’s current clawback policy is too narrow because it provides for recoupment only for accounting and financial misconduct due to fraud. In opposing the proposal, the company says it already retains the right to terminate all awards and payments if a participant is terminated for cause or commits an act of misconduct. It also argues that the proposal is too vague, not making clear what constitutes “significant financial or reputational harm,” triggering a recoupment.

The Connecticut Retirement Plans and Trust Funds submitted a proposal asking the company’s board to adopt a proxy access bylaw that 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 opposing the proposal, the company’s board says it already is responsive to shareholders, has a majority vote standard and is comprised of a majority of independent directors. It also argues that proxy access could encourage short-term thinking, increase the influence of special interest groups and disrupt company and board operations.

May 21
AvalonBay Communities
-- 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’s board opposes the proposal, saying it advocates a “one size fits all approach.” The board also argues that the proposal has the potential to impact the company’s ability to ensure the appropriate independence and robust qualifications of its directors and the ability of special interest groups sing proxy access to highlight their own agendas.

The Massachusetts Laborers’ Pension Fund filed a proposal asking AvalonBay’s board to adopt a policy that the chair of the board be an independent director. In its supporting statement, the proponent argues that the board should protect shareholders’ long-term interests by providing independent oversight of management, including the CEO. The company’s board, in opposing the proposal, points out that having a combined CEO and chair who works with the lead independent director creates a bridge between management and the board. It also sees the combined role as promoting unified leadership and direction for the company. Last year a similar proposal received the support of 19.5 percent of the votes cast.

Comcast--The International Brotherhood of Electrical Workers Pension Benefit Fund filed a proposal requesting that the company’s board adopt a policy that in the event of a change in control, there will be no accelerated vesting of any equity award granted to any named executive officer, provided, however, that the board’s compensation committee may allow unvested awards to vest on a pro rata basis up to the time of termination. In its supporting statement, the proponent points out that in a change of control, the company’s five senior officers would have been eligible to receive $428 million worth of long-term equity, including $114 million for the CEO. The company’s board, in opposing the proposal, says neither of its equity plans provides for automatic accelerated vesting of awards in connection with changes in control.

In addition to this proposal, Comcast shareholders will vote on the following:

• A proposal submitted by the Benedictine Sisters of Mount Scholastica and Friend Fiduciary Corporation asking the company to report on its direct and indirect lobbying policies, procedures, expenditures and oversight.
• A proposal filed by Kenneth Steiner requesting that the company adopt an equal shareholder voting plan, in which all holders of common stock will be entitled to one vote per share.

Goldman Sachs Group—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 and which incentivizes top executives to leave the company. The company states that it already currently discloses the information requested in the proposal and that no senior executive holds any equity-based awards whose vesting would accelerate if they resign to enter government service, and no senior executive has an employment agreement to that effect.

In addition to this proposal, Goldman Sachs shareholders will vote on the following:

• A proposal submitted by James McRitchie and Myra Young requesting that the company provide shareholders with the right to act by written consent
• A proposal filed by the Equality Network Foundation 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

Hasbro—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 allow director nominees to bypass the rigorous selection process conducted by the board, that dissident candidates elected via proxy access could increase the influence of special interest groups, and that the proposed threshold of 3 percent for three years is too low.

The International Brotherhood of Electrical Workers Pension Benefit Fund and the Trowel Trades S&P 500 Index Fund co-filed a proposal asking the company not to accelerate the vesting of senior executives’ equity awards upon a change in control. The supporting statement argues that the acceleration of unvested equity is inconsistent with a pay-for-performance compensation scheme. The company responded that the equity awards it grants to senior executives are double triggered, making it less likely that an executive will be resistant to a change in control due to personal interest.

As You Sow filed a proposal requesting that the company adopt a share-retention policy for senior executives.

SBA Communications—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 has introduced a competing management-sponsored proxy access proposal that would grant a group of up to 10 shareholders with at least 5 percent of the company’s shares for at least three years to nominate up to 20 percent of the board. The company argues that this structure for proxy access would better protect shareholders from potential abuse by investors who do not have a long-term interest in the company and who want to promote special interests.

May 22
Old Republic International—The California Public Employees’ Retirement System filed a proposal requesting that the company require a majority vote for the election of directors. In its supporting statement, CalPERS argues that a plurality standard effectively disenfranchises shareholders in uncontested director elections and prevents shareholders from holding directors accountable. The company states that the proposal could deter qualified director nominees from serving on the board and that majority voting for directors could increase the ability of special interest groups to change the board for short-term gains.

May 26
Healthcare Services Group—The UAW Retiree Medical Benefits Trust submitted a proposal asking the company to adopt a policy requiring the board chair to be an independent director. The supporting statement argues that independent oversight would increase the accountability of the board, which is especially needed at Healthcare Services Group because the company’s board has not implemented shareholder proposals that have repeatedly won majority shareholder support. The company argues that its lead director position and the fact that a majority of its current directors are independent provide the same counterbalance on the board that an independent chair would.

May 27
Chevron
— 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 the one-size-fits-all approach to proxy access would provide no safeguards against abuse and would allow director nominees to bypass the rigorous selection process conducted by the board. Furthermore, the company’s strong corporate governance practices and shareholder outreach program make a “rush to adopt proxy access” unnecessary.

The New York State Common Retirement Fund submitted a proposal requesting that the company nominate an independent director candidate with environmental expertise. The supporting statement argues that an environmental specialist on the board could help the company address environmental issues more effectively and would ensure that environmental standards are prioritized. The company argues that it would not be in the best interests of shareholders to select a director nominee based on a single factor and that the board already has sufficient access to environmental expertise.

The City of Philadelphia Public Employees Retirement System and the Connecticut Retirement Plans and Trust Funds co-filed a proposal requesting that the company report annually on its policy, procedures and payments for direct and indirect lobbying and grassroots lobbying communications. In their supporting statement, the proponents say the company does not disclose details of its trade association support and they highlight its membership in the U.S. Chamber of Commerce. They also report that Chevron spent more than $20 million between 2012 and 2013 on direct federal lobbying activities. The company opposes the proposal, saying that engaging in lobbying and participating in various business and policy organizations that “advocate positions designed to support free markets and fair energy industry legislation and regulations” is productive. Chevron also notes that it discloses its federal and California lobbying efforts and provides links to these reports on its Web site.

In addition to these proposals, Chevron shareholders will vote on the following:

• A proposal filed by Investor Voice requesting that the company lower the threshold required for shareholders to call a special meeting from 15 to 10 percent of outstanding common stock
• A proposal submitted by Green Century Capital Management requesting that the company adopt a policy to prohibit political spending with corporate funds
• A proposal filed by Thomas Strobhar requesting that the company disclose the recipients of corporate charitable contributions or merchandise vouchers over $5000
• A proposal submitted by the As You Sow Foundation asking the company to adopt a dividend policy to increase the return of capital to shareholders in light of climate change risks and potential stranded assets
• A proposal filed by the Sisters of St. Dominic of Caldwell requesting that the company adopt quantitative greenhouse gas (GHG) reduction goals for its operations and report on its plans to meet them
• A proposal submitted by the Sisters of St. Francis of Philadelphia asking the company to report on the results of its efforts to minimize the negative impacts of the its hydraulic fracturing operations.
• A proposal filed by an undisclosed shareholder requesting that the company adopt a policy requiring the board chair to be an independent director.

Ensign Group—Calvert Investments submitted a proposal requesting that the company publish a sustainability report on its response to environmental, social and governance-related issues. In its supporting statement, the proponent argues that tracking and reporting on ESG business helps companies compete in an environment that is characterized by “finite resources, changing legislation and heightened public expectations.” In opposing the proposal, the company’s board says its current ESG policies and practices make the requested report “redundant, unnecessary and wasteful.”

Exxon Mobil—The New York City Pension Funds filed 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’s board opposes the proposal saying it undermines the board’s ability to function effectively by potentially introducing “non-constructive and destabilizing dynamics” into the board election process each year and allowing special interest groups access to the board.

The Connecticut Retirement Plans and Trust Funds and the Sisters of St. Dominic co-filed a proposal asking the company to establish quantitative goals for reducing greenhouse gas (GHG) emissions and to publish a report outlining its plan for achieving such goals. In their supporting statement, the proponents assert that “a business plan with clear GHG reduction goals will strengthen Exxon’s competitive position, protect shareholder value and effectively manage climate risk.” They also note that close to 90 percent of Exxon’s GHG emissions are from the combustion of its products and that a strategy to manage climate risk that does not limit GHG emissions from its products would be incomplete. In opposing the proposal, the company’s board says that absolute GHG emissions reduction goals would need to incorporate the impact of “largely unforeseeable factors” and argues that such goals would therefore be impractical for guiding business performance.

In addition to these proposals, Exxon Mobil shareholders will vote on the following:

• A proposal submitted by the Ellen Higgins Trust 1959 requesting that the company adopt a policy that the chair of the board be an independent director
• A proposal filed by the Province of St. Joseph of the Capuchin Order asking Exxon to nominate an independent candidate with environmental expertise
• A proposal submitted by Thomas Sifferman requesting that the company increase the number of female directors on the board by at least one, to a total of three, by May 2016
• A proposal filed by Eva Sprunt asking the company to report the percentage of women at the top percentiles of compensation
• A proposal submitted by the United Steelworkers requesting that the company prepare a report, updated annually, on direct and indirect grassroots lobbying contributions and trade association expenditures
• A proposal submitted by the As You Sow Foundation requesting that the company report on its efforts to minimize the adverse effects of its hydraulic fracturing operations

The Southern Company--The Connecticut Retirement Plans and Trust Funds and the Sisters of Charity of St. Elizabeth filed a proposal asking Southern to adopt goals for reducing total greenhouse gas (GHG) emissions from operations and report to shareholders by Nov. 1, 2015, on its plans to achieve these goals. In their supporting statement, the proponents point out that the U.S. Environmental Protection Agency's Clean Power Plan would strengthen emission standards for power plants, which would "likely require substantial adjustments to Southern facilities," given that the company has the third highest level of carbon dioxide emissions of U.S. power producers. In its response opposing the proposal, the board states that it is not in the best interest of the company for it to adopt voluntary GHG emissions reduction goals because it would not add value to the company's "already robust" efforts to deploy technology to reduce its GHG emissions.

Southern shareholders also will vote on a proposal submitted by an unnamed shareholder asking the company to adopt a proxy access bylaw that 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.

May 28
Walgreens Boots Alliance
—The CtW Investment Group has filed a proposal asking the company to adopt a proxy access bylaw that would allow holders of at least 3 percent of the company’s common stock for at least three years to nominate up to 20 percent of the board. In it is supporting statement, the proponent argues that long-term shareholders should have a more meaningful voice in nominating and electing directors. The proponent argues that board oversight is particularly important at this time given the significant changes in the company’s focus and the current emphasis on stock buybacks. The company argues that the proposal will increase the company’s costs, boost the influence of special interest groups, disrupt company and board operations, encourage short-term focus and discourage highly qualified candidates from serving. A similar proposal received the support of 43 percent of the votes cast at last year’s annual meeting.

Walgreens Boots shareholders also will vote on the following shareholder proposals:

• A proposal filed by John Chevedden asking the company to adopt stock retention guidelines for senior executives
• A proposal submitted by Kenneth Steiner asking the company to adopt a policy restricting the acceleration of vesting of equity awards in the event of a change in control
• A proposal filed by the Singing Field Foundation and other co-filers requesting that the company include sustainability as one of the performance measures for senior executives under the company’s incentive plans
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