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BAD DIRECTOR VOTES SHOULD SEND A MESSAGE (2024 PROXY VOTING UPDATE)

by David Pogemiller | May 23, 2024



Shareholder voting results continue to roll in as we make our way through the
bulk of the annual meetings for 2024. So, we wanted to take a look at some of
the larger companies where shareholders are sending a message to the board that
results or governance aren’t good enough. Unfortunately for good governance and
accountability, most directors are re-elected with little in the way of dissent.

For this brief look we wanted to identify companies where the average
shareholder support for directors was less than 90% at this year’s annual
shareholder meeting — a pretty good indicator that something is amiss. In each
instance shareholders are trying to send the board a message (even if not always
as strongly as we’d like to see) and the question is, will they listen?

 


HIGHLIGHTS

 * Staggered boards continue to protect bad boards and their directors. Cognex
   (CGNX), ZoomInfo Technologies (ZI), Paycom Software (PAYC), Liberty Global
   (LBTYA), Five9 (FIVN), plus a few others on our list, all have classified
   boards where directors are elected on three year cycles which means at any
   given vote, only a minority of directors are up for re-election. This limits
   the ability for shareholders — including activists — to have a big impact at
   an annual election and, in most cases, should be looked at as a bad
   governance practice. The “good governance” argument that it promotes board
   continuity is a red herring. If boards want continuity, then deliver results
   that shareholders want and that will naturally result in continued annual
   director re-election and the desired continuity.
 * Norfolk Southern (NSC) and Ancora fought their proxy battle to a generally
   welcome outcome with 10 NSC directors being re-elected and 3 Ancora directors
   being added. Ancora will surely be disappointed that NSC CEO Alan Shaw
   managed to be re-elected given they had cited him as a primary factor in
   NSC’s underperformance.
 * Good governance believers — i.e. people who believe that boards and CEOs
   should deliver returns for shareholders — will be most disappointed in the
   Boeing (BA) vote results. Yes, a meaningful amount of shareholders voted
   against the directors (to varying degrees), but given the company’s
   performance and safety issues, the fact that shareholders are giving the
   board any support is disappointing. Delivering only 66% support for director
   David L. Joyce, the chair of the Aerospace Safety committee, sends a clear
   signal, but one wonders if in a scenario where Mr. Joyce is an employee
   rather than a director, wouldn’t he have been fired? The most surprising
   result is soon to be ex-CEO Dave Calhoun receiving 77% support. He was on the
   board before being appointed, continued on during his disastrous run as CEO,
   and is part of the board that is allowing him to stay on in that role through
   the end of the year. In their press release announcing his resignation, it
   said “he will continue to lead Boeing through the year to complete the
   critical work underway to stabilize and position the company for the future.”
   Shareholders had a clear opportunity at the meeting to call the board on this
   nonsense, but for some reason chose not to.
 * Danaher (DHR) saw a contingent of directors receive low support. The DHR
   board has a very high average tenure — 15.4 years vs 7.9 years for it’s peers
   — and is categorized as “entrenched.” Given the long tenures of most of the
   directors with lower support, shareholders would welcome the board becoming
   more active in its refreshment and working to identify a few new, outstanding
   directors to help lead the company forward as some of the longer-tenured
   directors roll off.
 * United Parcel Service (UPS) continues to struggle and shareholders are
   starting to send a stronger message to the board with this year’s average
   support dropping from 93% in 2023 and 96% in 2022. If performance continues
   to lag, expect shareholders to send a big message in 2025 — and that could
   include an activist coming in to try to right the ship.
 * A.O. Smith Corp (AOS) and Simon Property Group (SPG) both have multi-class
   share structures that enable more board protection. In the case of the AOS
   elections this year, the common stock directors were simply hammered. Despite
   this, because AOS elects based on a plurality of votes cast, all four
   directors up for election by common stock won re-election. In our view,
   plurality voting is another example of bad governance as it makes withheld
   votes worthless in an uncontested election. For example, in the extreme, if
   only 1 shareholder votes “FOR” and 1,000,000 vote “AGAINST”, that director
   will be elected to the board. Again, the argument here for “continuity” is a
   false one.


RECENT READS

 * Weekly Activism & Executive Moves Review (May 17)
 * Big Companies with Big Say-On-Pay Issues (2024 Shareholder Say-On-Pay Update)
 * BIG Company Directors with LOW Shareholder Support
 * CEO Pay: The $25 Million Plus Pay Club
 * Despite Shareholders Losing Over 3 Years, CEO Pay is Up at These Companies
 * Weekly Activism & Executive Moves Review (May 10)
 * 2024 Say-On-Pay Votes: 25 Companies Where Shareholders Are Unhappy
 * 2023 Say-On-Pay Winners & Losers
 * Say-on-Pay Voting: What You Need to Know


COMPANIES WITH LOW SHAREHOLDER SUPPORT FOR DIRECTORS AT 2024 ANNUAL MEETINGS

Company 1/3/5
Yr TSR Avg Director Rating Avg Vote FOR Directors Vote FOR Pay Activist
Vulnerability Director % FOR
Director Director
TSR Director
Rating Started Vote Filing AGILENT TECHNOLOGIES INC (A) 19%
18%
132% B- 88% 89% LOW Boon Hwee Koh
Mala Anand
Daniel K Podolsky 78%
86%
90% 14%
14%
17% B
C+
A+ 2003
2019
2015 View 8-K ALEXANDRIA REAL ESTATE EQUITIES INC (ARE) 11%
-22%
-2% C 84% 86% HIGH James P Cain
Michael A Woronoff
Maria C Freire
Steve Hash
Richard Hunter Klein
Joel S Marcus
Cynthia L Feldmann
Sheila K McGrath 57%
69%
70%
91%
91%
95%
98%
100% 7%
3%
8%
10%
7%
9%
-15%
6% C-
C-
C+
B
C
B-
C-
UN 2015
2017
2012
2013
2003
1994
2022
2023 View 8-K A. O. Smith Corporation (AOS) 27%
30%
110% B- 77% 97% LOW Mark D Smith
Ronald D Brown
Ajita G Rajendra
Kevin J Wheeler
Lois M Martin
Todd W Fister
Ilham Kadri
Victoria M Holt
Christopher L Mapes
Michael M Larsen 100%
100%
100%
100%
100%
100%
33%
45%
69%
94% 17%
23%
21%
8%
-1%
-1%
9%
10%
29%
10% A
A+
A
D
UN
UN
C-
B-
B
B- 2001
2009
2011
2017
2024
2024
2016
2021
2023
2021 View 8-K ARES CAPITAL CORP (ARCC) 26%
47%
92% B 77% LOW Michael K Parks
Mary Beth Henson
Michael L Smith 76%
76%
77% 14%
9%
23% C+
B-
B- 2019
2022
2022 View 8-K BOEING CO (BA) -9%
-21%
-47% C- 84% 62% HIGH David Leon Joyce
David L Calhoun
John M Richardson
Stayce D Harris
David L Gitlin
Akhil Johri
Lynn J Good
Robert A Bradway
Steven M Mollenkopf
Lynne M Doughtie
Sabrina Soussan 67%
78%
81%
82%
83%
83%
88%
89%
90%
91%
93% -6%
11%
-12%
-8%
17%
10%
4%
6%
10%
-3%
-8% C
B
D
C-
B-
D
C-
C
D
C-
C- 2021
2009
2019
2021
2022
2020
2015
2016
2020
2021
2023 View 8-K COGNEX CORP (CGNX) -8%
-36%
15% C- 89% 62% ELEVATED Sachin Lawande
Marjorie T Sennett 79%
99% -13%
-21% C-
D 2021
2021 View 8-K DANAHER CORP (DHR) 33%
21%
137% B+ 89% 93% LOW John T Schweiters
Teri List-Stoll
A Shane Sanders
Raymond C Stevens
Alan G Spoon
Linda Hefner Filler
Steven M Rales
Pardis C Sabeti
Mitchell P Rales
Elias A Zerhouni
Feroz Dewan
Rainer Blair
Jessica L Mega 74%
78%
79%
79%
86%
89%
94%
94%
95%
95%
98%
98%
99% 16%
19%
7%
20%
15%
15%
16%
20%
16%
19%
9%
11%
20% A
A
B
A+
B+
B
A
B+
A
A
C+
B-
B+ 2003
2011
2021
2017
1999
2005
1984
2019
1984
2009
2022
2020
2019 View 8-K ENPHASE ENERGY INC (ENPH) -25%
-15%
715% A- 81% 75% ELEVATED Joseph Ian Malchow
Badri Kothandaraman 70%
93% 24%
102% B
A+ 2020
2017 View 8-K EVERSOURCE ENERGY (ES) -14%
-21%
-4% C- 87% 85% HIGH Cotton M Cleveland
Joseph R Nolan Jr
M Williams Frederica
David H Long
John Y Kim
Gregory M Jones
Linda Dorcena Forry
Daniel J Nova
Loretta D. Keane 79%
80%
84%
88%
89%
89%
89%
90%
90% 10%
-7%
8%
-0%
2%
-2%
3%
-9%
-18% C+
D
C+
D
C-
D
C-
D
D 1992
2021
2012
2019
2018
2020
2018
2023
2023 View 8-K FIVE9 INC (FIVN) -15%
-69%
3% C+ 67% 72% HIGH Michael J Burdiek
Julie Iskow 60%
74% 35%
-29% B+
C- 2015
2023 View 8-K KEYSIGHT TECHNOLOGIES INC (KEYS) -6%
6%
96% B- 88% 91% ELEVATED Charles J Dockendorff
Robert A Rango
Ronald S Nersesian 79%
90%
95% 18%
19%
18% B+
B+
B+ 2014
2015
2014 View 8-K LAS VEGAS SANDS CORP (LVS) -23%
-19%
-16% C- 84% 65% HIGH Micheline Chau
Lewis Kramer
Irwin Chafetz
Charles D Forman
Patrick Dumont
Robert G Goldstein
Alain Li 69%
70%
85%
86%
89%
90%
99% 3%
-1%
2%
2%
-4%
1%
-4% C
C-
C+
C+
D
C-
UN 2015
2017
2005
2004
2018
2015
2024 View 8-K LIBERTY GLOBAL LTD (LBTYA) -4%
-40%
-37% C- 77% HIGH Larry E Romrell
Paul A Gould
John C Malone
Michael T Fries 69%
70%
82%
85% 2%
2%
2%
2% C-
C-
C-
C- 2005
2005
2005
2005 View 8-K MASCO CORP (MAS) 34%
21%
97% B 78% 91% LOW John C Plant
Marie A Ffolkes
Mark R Alexander 65%
76%
92% 17%
11%
16% A
C
C 2012
2017
2014 View 8-K MEDPACE HOLDINGS INC (MEDP) 85%
136%
583% A+ 65% 97% LOW Fred B Davenport Jr
Cornelius P McCarthy III 61%
70% 39%
39% A+
A+ 2018
2018 View 8-K MKS INSTRUMENTS INC (MKSI) 52%
-26%
81% C+ 89% 93% ELEVATED Elizabeth Mora
Raj Batra
Gerard G Colella 79%
93%
96% 16%
10%
17% A-
C
A 2012
2018
2014 View 8-K MORNINGSTAR INC (MORN) 53%
29%
129% B+ 88% 99% LOW Stephen Joynt
Cheryl A Francis
Gail S Landis
Robin Diamonte
Caroline J Tsay
Doniel Sutton
William M Lyons
Steven N Kaplan
Joseph D Mansueto
Kunal Kapoor 74%
81%
83%
84%
84%
84%
95%
95%
99%
99% 17%
16%
15%
17%
23%
7%
11%
16%
16%
22% C
A
B
A+
B+
C
C+
A
A
B+ 2019
2002
2013
2015
2017
2021
2007
1999
1984
2017 View 8-K NORFOLK SOUTHERN CORP (NSC) 8%
-11%
25% C 66% 27% HIGH Mary Kathryn Heitkamp
William Clyburn, Jr
Sameh Fahmy
John C Huffard Jr
Alan H Shaw
Claude Mongeau
Gilbert H Lamphere
Thomas Colm Kelleher
Phillip S Davidson
Richard H Anderson
Francesca A Debiase
Marcela E Donadio
Christopher T Jones 54%
63%
63%
64%
64%
65%
69%
69%
84%
88%
88%
89%
89% 2%
2%
2%
5%
-3%
8%
2%
9%
-1%
2%
-1%
13%
5% UN
UN
UN
C-
C-
C-
UN
C-
B-
UN
B-
A-
C- 2024
2024
2024
2020
2022
2019
2024
2019
2023
2024
2023
2016
2020 View 8-K PAYCOM SOFTWARE INC (PAYC) -36%
-45%
-15% B- 79% HIGH Felicia Williams
Robert J Levenson
Frederick C Peters II 69%
75%
93% -19%
28%
28% C-
A
A 2022
2007
2014 View 8-K SIMON PROPERTY GROUP INC (SPG) 47%
41%
12% B 84% 94% LOW David Simon
Herbert Simon
Richard S Sokolov
Glyn Aeppel
Larry C Glasscock
Allan B Hubbard
Gary M Rodkin
Peggy Fang Roe
Reuben S Leibowitz
Daniel C Smith
Stefan M Selig
Marta R Stewart
Randall J Lewis
Nina P Jones 100%
100%
100%
66%
69%
70%
70%
70%
89%
97%
99%
99%
99%
100% 11%
11%
11%
1%
9%
12%
3%
3%
9%
12%
4%
5%
35%
4% A-
A-
A-
C-
B
B
C+
B
B-
B
B-
B-
B+
UN 1993
1993
1996
2016
2010
2009
2015
2021
2005
2009
2017
2018
2023
2024 View 8-K TARGA RESOURCES CORP (TRGP) 68%
217%
219% B+ 88% 95% LOW Lindsey Cooksen
Joe Bob Perkins
Beth A Bowman 84%
87%
94% 62%
14%
19% A
B
A- 2020
2012
2018 View 8-K UNITED PARCEL SERVICE INC (UPS) -12%
-25%
70% C- 90% 87% HIGH William R Johnson
Kathleen E Johnson
Russell Stokes
Kevin M Warsh
Franck J Moison
Rodney C Adkins
Carol B Tome
Christiana Smith Shi
Michael J Burns
Eva C Boratto
Angela Hwang
Wayne M Hewett 82%
87%
86%
86%
86%
91%
92%
93%
93%
94%
94%
94% 10%
-0%
-0%
9%
7%
8%
7%
6%
6%
1%
10%
1% C-
C-
C-
C
C-
C
C-
C
C-
C-
C
C- 2009
2020
2020
2012
2017
2013
2003
2018
2005
2020
2020
2020 View 8-K ZOOMINFO TECHNOLOGIES INC (ZI) -45%
-69% C- 72% 89% HIGH Keith Enright
Henry Schuck 67%
76% -21%
-21% C-
C- 2020
2019 View 8-K ZSCALER INC (ZS) 39%
2%
129% B 83% 72% ELEVATED Jagtar Singh Chaudhry 83% 31% B+ 2007 View 8-K


RECENT ANALYSIS


DAILY SPAC UPDATE – JUNE 20, 2024

Aimei Health Technology Co (AFJK) $1.6B Deal with United Hydrogen Group. WTMA
Non-Redemption Agreement.


DAILY SPAC UPDATE – JUNE 19, 2024

FNVT Reduces Deal Valuation from $1B to $800M. GPAC Delays Deal Vote Again; Now
June 27. HCVI Posts Merger Agreement.


DAILY SPAC UPDATE – JUNE 18, 2024

HCVI Deal with Namib Minerals. 3 SPAC IPOs – Melar Acquisition, Lionheart, and
Flagship. APCA Deal Terminated; to Liquidate.


ACTIVISM UPDATE – JUNE 17

WisdomTree (WT) and Medallion (MFIN) win their fights. Trian downsizes its stake
in Invesco (IVZ). Enhabit (EHAB) and Masimo (MASI) set their meeting dates as
their shareholders continue to lose value.


DAILY SPAC UPDATE – JUNE 17, 2024

FLFV + Thunder Power Vote. PLAO Extension Approved. RWOD Forward Purchase
Agreement. GPAC Deal Vote Postponed.


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