The vote results from General Electric’s (GE) annual meeting held on April 27th were filed with the SEC on Tuesday. A “5th grader” reviewing the results could easily see that General Electric prevailed overwhelmingly: in reelecting its directors, approving executive pay, and voting down shareowner proposals. I question whether GE’s board and its executives could honestly tell said 5th grader that the vote results reflect a fair representation of the company’s stakeholders, which for instance include employees, retirees, investors, corporate partners, customers, and the residents in communities in which it operates. Could these very directors teach what they claim?
Proxy advisory firm Institutional Shareholder Services (known as ISS; owned by publicly-traded MSCI Inc.), had initially advised a vote against General Electric’s advisory (i.e. non-binding) vote on executive compensation. In an April 6, 2011, report, ISS reportedly said, “there is a misalignment between long-term company performance and CEO pay.” GE took offense and took the offensive claiming that ISS mistakenly attributed increases in accumulated pension values. GE also pleaded with select shareowners to disregard ISS and vote in its favor. Subsequently, GE filed an amended proxy statement declaring CEO Jeff Immelt would have to meet some hurdles (of mere mediocrity in one case) in order to earn his stock options. Hold your applause. I take offense that ISS fell for the bait and switched its advice to support GE’s executive compensation practices.
The raison d’etre of stock market players are various, but for anyone who has been holding stock, or intending to hold, for the longer-term (for simplicity let’s say in excess of one year), corporate governance has direct, profound implications on corporate value. Stock traders may be disregarding wholesale anything other than up/down ticks in price and margin requirements, but in fact, these so-called “providers of liquidity” — and societal stakeholders at large — are impacted by corporate governance. In the case of General Electric (GE), one of the most widely held and actively traded stocks, all stakeholders should be aware of the abuses of a select few that impact many. With external recourse nearly nonexistent, it is up to shareowners to realize the latent power of their proxy votes, vote accordingly, and effect change. Time is of the essence as GE’s annual meeting is rapidly approaching. Non-GE shareowners are encouraged to read and apply standards to their companies’ proxies. The corporate wrongs detailed below are widespread — it is proxy season so don’t delay.
No question, General Electric’s (GE) stock returns year-to-date and over the past two years have out-performed the benchmark S&P 500 Index — thanks to a little help from the USG and an endorsement from Warren Buffett. However, this recent out-performance is not sufficient reason to break out the bubbly and party like it’s 1999. In fact, GE’s five and ten-year returns are cause for pause and reflection this proxy season: -42% vs. +1% (S&P 500) and -51% vs. +15%, respectively (see 5-yr chart below). Particularly worrisome is GE’s undaunted espousal of stock buybacks despite compelling evidence of serious value destruction and limited impact on share count (details provided at end of article). In addition, similar to GE’s recent stock price, its dividend too has been on the rise, however, it remains well below its pre-crash level (on a per share basis). Let’s now turn our attention to GE’s annual meeting, to be held April 27th in Salt Lake City, and the items up for vote.
A shareholder submitting a proposal for shareholder vote at an annual shareholder meeting (or via proxy) faces a litany of requirements. Very kind of corporations and the SEC to allow shareholders to submit proposals, but how convenient that boards of directors and executives are insulated from most proposals in more ways than one. Continue reading to see my “proposal” to GE.
There appears to be a delay (by design?) concerning the ‘gold proxy’ vote instruction form for Carl Icahn’s nominees for directorships at Lions Gate (LGF).
Lions Gate’s annual shareholder meeting is tomorrow, Tuesday, December 14. I received the company’s white and most recently its blue proxy cards via mail over the past week or two. However, Icahn’s gold proxy just arrived today, the day prior to the meeting. Note that I am located a mere 2 1/2 hour drive from where the proxy vote materials were purportedly sent. Receiving the materials a day in advance of the meeting is unreasonable and suggests it could be by design. Who is to know if someone was told to sit on the materials and delay their sending. For a packet that was supposed to be ready for delivery on the 6th of December to take a full week to arrive in a neighboring state naturally raises suspicion. We shall see if we can learn if there is a story behind this.
Broadridge Financial Solutions (BR), the former Brokerage Services division of ADP (ADP) spun off in 2007, wields inordinate power (a near absolute monopoly) in the realm of proxy services — an unsexy but crucial component of capital markets. Most disturbing is Broadridge’s heretofore ostensible disregard of shareholder concerns about its web delivery platform for virtual annual meetings. For background and evidence of the perils of virtual (especially virtual-only) shareholder meetings, please see my recent coverage of Symantec (SYMC). To its credit, Symantec has since listened to shareholders and shareholder rights activists, all capital market stakeholders, and will offer a hybrid (live, in-person and virtual) meeting format.
Nevertheless, Broadridge’s inferior technology for delivering virtual meetings remains an unresolved matter, and it was conspicuously on display this past Tuesday at Broadridge’s own virtual-only annual meeting. Glyn Holton, founder and executive director of the United States Proxy Exchange (USPX), was granted a proxy to attend. He documents his precarious experience in “Broadridge Smokes Their Own Dope.” With such far reaching consequences given the inadequacy of Broadridge’s technology, and unfortunately the potential for more virtual-only meetings, this is a must-read; and after all, most individuals own stocks in some shape or form. While technology should be affording shareholders ever greater transparency and accessibility, in fact, in this case it is insidiously driving disenfranchisement.
Disclosure: No positions in BR, ADP, or SYMC. Author is a member of the United States Proxy Exchange. USPX is a grassroots movement funded entirely by individual investors seeking to facilitate shareowner rights.