Wynn Resorts

Annual meeting: April 21, 2017

One of our most overpaid CEOs from As You Sow’s list last year just got a big raise. Stephen Wynn’s total compensation increased from $20 million to $28 million. His stock award and non-equity incentive compensation increased by an even $4 million each from 2015 to 2016.

Wynn Resorts has been on our list for three years. The CEO is paid more than peers. The pay is out of proportion to the value delivered: HIP Investor’s regression analysis found that he was paid an excess of nearly $9 million in 2015. (See our report for details). Since shareholders last voted on this pay package in 2014, the board has reduced the CEO’s salary — though it remains among the highest for S&P 500 companies — but continues to award large incentive payments and excessive perquisites

Wynn’s 2016 total incentive compensation is $25 million – divided between cash and stock – the maximum allowed by the plan. There were three performance criteria: 2016 Adjusted Property EBITDA, (b) Forbes Five-Star distinction for specific properties, (c) Wynn Palace opening on or before December 31, 2016. It is unclear whether these criteria, particularly the latter two, are in shareholders’ long term best interests. In setting such criteria, the board focuses the executives on meeting it at any cost, and there reports  hint at long-term issues with investment in Macau.  Indeed, the company’s own 10k lists one of its risk factors as: “Visitation to Macau may decline due to economic disruptions in mainland China, restrictions on visitations to Macau from citizens of mainland China and the anti-corruption campaign.”

Shareholders have seen value decline over the past five years. While a heading in the proxy statement titled “Long-Term Total Stockholder Return Performance Remains Strong” it is followed by a chart that shows only the performance of the last year. Indeed, the stock trades at less than half of what it traded for in February 2014.

Insulated from shareholders

We have found that the most overpaid CEOs are often insulated from shareholder votes in a number of different ways, and Wynn Resorts falls into that category. There is a large insider ownership stake: Stephen Wynn owns 11.8% of the shares and Elaine Wynn owns another 9.4%. I wrote about Elaine Wynn, the twice-married, twice divorced, co-founder of the hotel and her attempts to get renominated to the board in 2015.

Vanguard holds 7.6% of the company; likely primarily due to indexed funds. According to one recent article  “In 2016, investors pulled more than $380 billion from actively managed mutual funds while pouring almost $480 billion in passive investments.” Traditionally, such passive investments have not been diligent in voting against compensation packages.

Finally, Wynn Resorts allows shareholders to vote on pay only once every three years. The company claims this triennial vote is “the appropriate time frame for the Compensation Committee and the Board of Directors to evaluate the results of the most recent advisory Say-on-Pay vote, to develop and implement any adjustments to our executive compensation programs that may be appropriate in light of a past advisory vote on executive compensation.”

Directors at all but a handful of companies in the S&P 500 have shown themselves capable of annual evaluations not just of votes, but of compensation practices. Shareholders would be advised to support an annual vote on pay.

Wells Fargo

Annual Meeting: April 25, 2015

When it was first announced that Wells Fargo would not be giving bonuses to the named executive officers this year journalists praised the board. It was seen as a sign of accountability in response to widespread consumer fraud charges. That scandal, spurred in part by an incentive-based corporate culture, resulted in a $185 million settlement with the Consumer Financial Protection Bureau, and in the departure of over 5,000 employees, including a few senior executives.

In response to the outcry, the board has taken some steps to limit payouts, particularly for departed CEO John Stumpf.

However, Wells Fargo still has extraordinarily high executive compensation. The actions taken do not go far enough to restore investor trust. President and CEO Timothy Sloan’s pay package grew 17% from last year to $13 million. Sloan did not receive a bonus this year, but the value of his stock award increased from $8 million to $10.5 million. The increase is more than double the $1 million non-equity incentive compensation award he received last year.

It is true that if the company fails to meet performance criteria those performance shares may be worth less than estimated, but they may also be worth more. The footnotes on the summary compensation table note that at the 150% of target award Sloan would receive 327,444 performance shares with a current value of $15,750,056.

In addition, Sloan has a hefty salary. In March of 2016, when he was promoted to president, Sloan’s salary was increased from $2 million to $2.4 million. As we noted in our analysis then, this was not only extremely high for a president of a company but was higher than that of the vast majority of CEOs of similarly sized companies.

Compensation is only one issue shareholders will vote on at the upcoming annual meeting.  The Sisters of St. Francis of Philadelphia and sixteen co-filers have filed a proposal urging the company to report on the root causes of the fraudulent activity and steps taken to improve risk management and control process. Other proposal topics include a call for a report on lobbying; a proposal on gender equity; one on breaking up the bank; and, finally, one calling for adoption of an Indigenous People’s Rights Policy spurred by Wells’ funding of the Dakota Access Pipeline.

For many years to come, Wells Fargo will be held up as an example of impacts of poorly designed incentive plans and the very real impacts of reputational damage. The full extent of the damage is unknown, but it is likely that the Wells Fargo annual shareholder meeting will likely be one of the most interesting of 2017.

Pay Ratio Redux

Ratio Redux

When Dodd-Frank was passed in Congress and signed by President Obama in 2010 a long battle began to get a particular portion adopted: one that allows shareholders to see the ratio between the CEO and a median employee. Finally, in 2015 it was passed. Here’s something I wrote at the time which gives background to the bill.

But as with so many other areas, the Trump administration is opening previously settled ground for new contests.

Anyone can write a letter: if you have a 401k or pension fund then you are a shareholder your opinion matters.

To submit, simply: go to Piwowar’s statement, there’s a link to a form set up just for this regulation (look for “submission of detailed comments”): Or you can email: rule-comments@sec.gov and put “Pay ratio disclosure” in subject line.

The letters ultimately are posted on-line. You can read some of them here if you are looking for inspiration.

Also, below I am pasting the copy of the letter As You Sow submitted today:

 

Re: Reconsideration of Pay Ratio Rule Implementation

Dear Chairman Piwowar,

As Program Manager of As You Sow’s Power of the Proxy initiative, I am writing to provide our comments in response to the February 6, 2017 public statement regarding Reconsideration of Pay Ratio Rule Implementation.

Founded in 1992, As You Sow promotes environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies. Our efforts create large-scale systemic change by establishing sustainable and equitable corporate practices.

As You Sow was founded on the belief that many environmental and human rights issues can be resolved by increased corporate responsibility. As investor representatives, we communicate directly with corporate executives to collaboratively develop and implement business models that reduce risk, benefit brand reputation, and protect long term shareholder value while simultaneously bringing about positive change for the environment and human rights.

We write today to encourage the SEC to maintain its scheduled implementation of 953(b). The provision was a portion of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress and signed into law on July 21, 2010.

The implementation of this section of the law — requiring companies to disclose a ratio between the pay of the CEO and a median employee — was slowed by corporate opposition. The SEC commissioners finally approved the rule on August 5, 2015. At that time Larry Mishel of EPI noted, “The delay shows the power of corporate lobbyists, but the finalizing of the rule is a win for the American people.” As You Sow believes strongly that any further delay on this rule represents nothing but a victory for corporate lobbyists.

The first of the SEC’s missions is to “protect investors.” That statement further notes that, “Companies offering securities for sale to the public must tell the truth about their business.” We believe that reporting pay ratio is an important part of the truth that we, as investors, deserve to have.

The February statement appears to be a response to issuers (the companies themselves), and not investors. According to the statement, “issuers have begun to encounter unanticipated compliance difficulties” Frankly, we are surprised that there are “unexpected” difficulties given the number of potential difficulties identified by companies as the rule proceeded through the process.

However, past pattern has shown that issuers decry every potential regulation. I recall, for example, the extraordinary response from many corporations nearly 15 years ago when investors sought to have options expensed. I hear many echoes of letters written then being raised today in opposition to all things Dodd-Frank.

In contrast to the letters from corporations and consultants opposing the initial pay ratio rule there were nearly a quarter of a million of letters submitted in favor of the ratio. Shareholders, both individual and institutional, explained their interest in the pay ratio data during the initial rule making and many are doing so again.

We believe the disclosure will help shareholders see which companies view employees as resources, and not just as costs. Companies universally acknowledge the need to attract and retain officers and executives when justifying compensation packages. The pay ratio, when compared to that of peer companies, will assist shareholders in seeing whether the attraction and retention of other employees is a similar priority.

Poorly designed executive compensation programs can incentivize a short term focus. The long term sustainability of the company depends on so much more than the individual in the corner office.

We urge you to maintain your current schedule.

 

Disney Vote

Walt Disney

Annual Meeting: March 8, 2017

One of the earliest annual meetings of the proxy season is at Disney, which held its meeting on March 8. The vote results were released on March 13.  The advisory vote on pay received support from 83.59 of votes cast. This is a low level of support for such a large company and the lowest level of support at Disney since 2014.

Most companies have fiscal year end dates of 12/31, and these companies are about to file their proxy statements. We are on the cusp of what insiders call “proxy season” when filing begin in full force, followed by annual meetings and votes in April and May. Votes are typically released about a week after the meeting.

Disney’s CEO and Chairman Robert Iger has been listed in our Overpaid CEOs report for the past three years. His most recent total compensation was $43.9 million. This was a slight decrease from the prior year, based on his bonus, but it still left him as one of the highest paid CEOs in the world. In 2016, Disney’s shares were down 0.8% for 2016, the first such annual decline since 2011 according to press reports.

As reported by Fund Votes the advisory vote on pay proposal at Disney received 80.6% support in 2014; 84.2% support in 2015 and 85.1% support in 2016. The median level of support for such a proposal among S&P 500 companies was well over 95% last year.

In this context the support from 83.59 of votes cast shows that shareholders are not pleased. Also, of note, the director who received the 2nd lowest levels of support was compensation committee chair Susan E. Arnold.

The company that asks attendees of its theme park to “put our service to the test,” doesn’t seem to be listening very well to its shareholders.

AT&T

AT&T

Annual meeting: April 28, 2017

AT&T recently reported 2016 total disclosed compensation for Chairman and CEO Randall Stephenson: $28.4 million. The company appeared on our overpaid list for last and compensation has increased this year.

I want to quickly highlight an issue from the footnotes. Stephenson received $1.2 million in matching contributions to his 401k and “certain ‘makeup’ matching contributions” in the Stock Purchase and Deferral Plan.

For the 401(k) AT&T offers “substantially all” of its employees the opportunity to defer income. AT&T matches 80% of employee contributions, limited to the first 6% of cash compensation. Executive officers only receive a match on base salary. Stephenson’s base salary is $1,791,667.

The chart on “Nonqualified deferred compensation,” page 81 of company proxy statement filed on March 10 shows that Stephenson “deferred” almost $6 million of his pay in 2015. Executive officers at AT&T can defer 30% of their salary and up to 95% of their short term awards.

Deferred pay offers those executive who make more money than they spend in a year, the option to receive the money at some point in the future. In addition to providing a guaranteed rate of return, deferring compensation saves executives’ on their taxes.

Here’s how it works according to the proxy:

“Participants receive a 20% match in the form of additional deferred share units; however, with respect to short-term awards, officer level participants receive the 20% match only on the purchase of deferred share units that represent no more than their target awards. In addition, the Company provides “makeup” matching contributions in the form of additional deferred share units in order to generally offset the loss of match in the 401(k) plan caused by participation in the SPDP and the CDP, and to provide match on compensation that exceeds Federal compensation limits for 401(k)”

Bottom line: the aggregate balance of Stephenson’s deferred compensation at FYE was $42 million. The present value of his accumulated pension benefits is $54 million. This clearly goes beyond helping a CEO plan for his retirement; it is a wealth transfer to future generations.

Nice match if you can get it. But is it something shareholders really need to pay for?

Download CEO Pay 2017 report

NOW AVAILABLE: The 100 Most Overpaid CEOs
Download the report now!

CEO pay grew an astounding 943% over 37 years, from 1978-2015, vastly outpacing growth in the cost of living, the productivity of the economy, and the stock market.
The third report in the series,
The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?
highlights the forces behind disproportionate pay and the fund managers who continue to approve these pay packages.

Cover_100MostOverpaidCEOs_2017

Exxon Signs Agreement with Tillerson; Questions Remain

The conflicts of interest in the emerging Trump administration is the stuff of daily headlines. On January 4, Exxon Mobil filed a Cancellation and Exchange Agreement with the SEC that outlined the treatment of a portion of retired CEO Rex Tillerson’s holdings. Under the agreement “Tillerson will surrender all unpaid ExxonMobil restricted stock and restricted stock units he holds, consisting of 2,026,000 underlying shares,” and a lump sum cash payment will be paid to an Ethics-Compliance Trust.

Note that these restricted stock units are in addition to shares of Exxon that Tillerson owns outright. For those, he would be required under 18 USC 208 to either divest himself of the conflicting stocks or recuse himself from taking official actions that directly and substantially impact the holdings. As Secretary of State, recusal would interfere with his official duties so he will divest himself of the conflicting stock and then turn the proceeds over to a blind trust to be administered by an independent executor.

This novel agreement raises several concerns:

The agreement imposes a significant cost onto shareholders.

Pursuant to this agreement, Tillerson will not be selling his shares on the open market, as he would have under normal conditions. Instead, shareholders will bear the cost. According to the agreement Exxon – and thus Exxon shareholders – will “make a cash payment” into the Tillerson trust. One source estimates the cost of payment could be as high as $180 million.

This payment represents a reversal of long-stated policy.

One feature of Exxon Mobil’s executive compensation program that has earned praise from corporate governance experts for years is its long term holding requirements. Again and again, the company has touted its objective of “alignment of executive interests with the long-term interests of shareholders” by extending stock holding requirements up to 10 years beyond retirement. In fact, the most recent proxy statement notes that: “Equity awards are not subject to acceleration, even at retirement, except in the case of death.”

The compensation committee has essentially gone back on that commitment to execute this agreement to award Rex Tillerson an extraordinary windfall (albeit one held in a trust).

Tillerson locks in current value of Exxon stock

The company, to appease federal ethics authorities, is discounting the amount to be paid to Tillerson by 1.6%. Consider, however, that the stock price has increased by over 6% since Trump’s election. Tillerson appears likely to lock those gains (depending on exact timing). What will happen to the value of that stock in the next 10 years? The price of oil rises and falls on externalities. Some of the externalities we expect to see over the coming years are:

– ongoing oil supply glut

– continued increase in cost of finding and developing new oil sources

– sharp reductions in cost of alternative energy sources
– growing adoption of electric drive
– declining oil dependence in OECD nations
– decarbonization trends in developing economies, including leapfrogging of fossil fuels
We believe these factors, combined, make it likely that Exxon stock will fall by far more than 1.6%.

There were alternatives available

The board and compensation committee could and should have taken a harder bargaining position. For many years, Rex Tillerson has been among the highest paid CEOs in the United States. Tillerson could have surrendered at least a portion of the shares at issue, rather than foisting the costs of a highly preferential package onto shareholders. Typically, when an executive changes jobs, pending shares are simply forfeited.

Tillerson already has substantial accumulated shares and vested retirement benefits. The agreement notes that: “Tillerson’s vested and unpaid benefits pursuant to the ExxonMobil Savings Plan, the ExxonMobil Supplemental Savings Plan, the ExxonMobil Pension Plan, the ExxonMobil Supplemental Pension Plan, and the ExxonMobil Additional Payments Plan shall be paid pursuant to the terms and conditions of the applicable plan.” The totals from those plans, according to the most recent proxy statement, reach over $70 million. Although, Tillerson’s life insurance under the company will be cancelled, “The Corporation agrees to use its commercially reasonable best efforts to obtain and, if so, pre-pay a life insurance policy from an independent third party providing substitute coverage as comparable as possible to the terminated coverage.” The value paid to his survivors will be about approximately $13 million. To be fair, Tillerson will need to give up his retiree dental insurance coverage from the company.

Proxy voting disclosure of non-U.S. funds: From accessible to invisible; clear to cumbersome

By Rosanna Landis Weaver and Dan McCarthy

As we begin work on our third “100 Most Overpaid CEOs” report with its analysis of how funds vote on egregious pay packages, we are also expanding the range of our research to look at non-U.S. funds.

The degree of transparency on proxy voting practices and data accessibility covers a range as vast as the globe. Many funds – including a preponderance of Canadian funds – publish their voting records in searchable databases. Others disclose this information in a more cumbersome way, but it is accessible (though one may need to use Google translate.)

Others publish only voting guidelines, or aggregated voting data. Dutch fund ABP discloses the why and how of their voting without getting to company-level specifics. For example, ABP discloses their aggregate voting data for executive compensation, noting that out of 1700 remuneration resolutions, they voted “against’ 54% of the time, and “for” 45% of the time. Further along they shed light on their rationale, “The main reasons for voting against were excessively generous severance packages, inadequate links between payment and performance and opaque schemes.”

In our review of websites we found it not uncommon for funds to focus only on voting domestic equities. Foreign equities may then be delegated to a third party, including proxy advisors or money managers. A few international funds take it a step further, declining to even vote on foreign equities at all. Given the disproportionately high pay of CEOs in the U.S. market, we believe that this is an abdication of their responsibility.

Finally, there were a number of funds that did not respond to our attempts at outreach. If you have suggestions for other funds to include please email me at rlweaver@asyousow.org. I will update this post with new links as they become available.

Australia:

The superannuation funds of Australia are the rough equivalent of pension funds in the United States, but with stronger government support. We reached out to several of the largest of these funds. Two that disclose proxy votes are:

First State Super

QSuper, based in Brisbane, Queensland delegates proxy voting to its “externally mandated managers the right to vote in accordance with our managers’ respective proxy voting policies.” While QSuper noted it did not disclose votes on its website at this time, the representative added in correspondence, “There are numerous changes to reporting standards for the superannuation industry that are currently being implemented and tabled for industry discussion.”

Canada:

In Canadian funds (a few of which were included in the report last year) we found the best disclosure record. Though the disclosure is voluntary, it is widespread among large public sector funds, in part due to their attention to good governance and persistent efforts for transparency by responsible investor groups including SHARE (Shareholder Association for Research and Education).

“Given the importance of proxy voting to the sustainability and stability of capital markets, an argument can be made for a wider commitment to proxy voting transparency among pension plans and their asset managers,” Peter Chapman, Executive Director wrote in response to our enquiries. “The seven crown asset managers and pension funds disclose [included below] voluntarily, covering more than a dozen of Canada’s largest pension plans. All are in the public sector. “

 

Netherlands:

Norway

Norges

Norges Bank, the central bank of Norway, manages the Government Pension Fund of Norway, potentially the world’s largest sovereign wealth fund. In spring 2016, Yngve Slyngstad, CEO of the fund said,  “We think, due to the way the issue of executive remuneration has developed, that we will have to look at what an appropriate level of executive remuneration is as well [as the link between pay and performance].”

Norges discloses their voting guidelines along with their proxy voting record in a database searchable by company name and ticker.

South Africa

Switzerland

Bundes Pensionkasse
Swiss Federal Pension Fund PUBLICA actively exercises its voting rights in respect of companies incorporated in Switzerland, and discloses “voting behavior” on its site. The Fund reports that, “Voting rights in respect of companies ex Switzerland are typically not exercised.” However, in cases where a company is incorporated in Switzerland but listed on the NYSE the fund votes on advisory votes on pay. At TE Connectivity this year, for example, the fund voted against the pay package.

United Kingdom

In the United States money managers are required to file forms with the SEC reflecting their proxy vote (NP-X filings which we used in our report.) There is no similar requirement in the UK, but it is considered a best practice for funds to provide disclosure on their websites. This is a list of funds that have signed onto the UK Stewardship Code. Principle 6 of the codes states that Institutional investors should have a clear policy on voting and disclosure of voting activity.

The clear policy, however, does not equal clear disclosure. In some cases we found language such as this from the Co-Operative Pension Scheme: “The Trustee does not generally seek to prescribe how its investment managers should vote proxies on the equity they hold on behalf of the Scheme.”

Other funds – including the Greater Manchester Pension Fund, West Midlands Pension Fund, Merseyside Pension Fund, Lancashire County Pension Fund – subscribe to research and/or voting services from Pensions and Investments Research Consultant (PIRC). One of the largest non-U.S. proxy advisory firms that cover U.S. companies, PIRC has a record of assiduously advising shareholders to vote against excessive compensation packages. However, in a number of cases there is language that allows for a case by case override of PIRC’s recommendations, and there is no way to ascertain if or when such discretion is used.

In some cases the voting is disclosed, but dated and/or cumbersome to sort out.  For example, British Airways Pension votes are provided through 2014, but are reported by only by proxy item number.

The public pension funds on the list for which we were able to find voting detail include:

British Coal Staff Superannuation Scheme (though it provides separate links with various disclosure for: Hermes, Blackrock, Schroders and Bailee Gifford.

The Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC)

South Yorkshire Pension Authority

Barnes and Noble

Annual Meeting: September 14, 2016

Barnes & Noble proxy statement released July 29, shows shareholders see the final amount of the severance received by former CEO Michael Huseby. He has resigned in August 2016 “for good reason” and received a total severance of over $15 million. In 2014, the company paid a severance of $3.6 million for the prior CEO, William Lynch, who resigned in July 2013.
Next year’s proxy statement will include the final figure on another CEO severance package. On August 16, 2016, the company announced that his replacement, CEO Ronald Boire would be leaving the company because he “was not a good fit for the organization.”

The final tally of his severance isn’t immediately clear, but his employment agreement provides details. (Thanks to @AmyLeeRosen for posting this on twitter today.) The three-year employment agreement, effective on September 8, 2015 provides that he will receive a severanace of two times the sum of his salary and bonus. Boire’s annual salary was $1.2 million. His bonus, as reported in the summary compensation table was $1.7 million. In the proxy statement issued less than a month ago, the company estimated that this cash component of a severance package would total $4.8 million.

But of course, there’s more. As employment agreements are, the language is dense. He will receive “the aggregate annual dollar amount of the payments made or to be made . . . [for] providing you with the benefits set forth in Sections 3.3, 3.6 and 3.7 above.” Let’s break those down:

• The first of these, section 3.3, is the monthly car allowance of $1,500.00, “or such higher amount as may be determined by the Compensation Committee.”

• The next Section 3.6 is general employee benefits: “including vacation, to which you are entitled under the employee benefit plans or policies that the Company provides for its employees generally, as well as any employee benefit plans or policies that the Company provides for its executive officers generally.”

Let me note, that the first part of that phrase (italicized here) is standard, but the second part is a more recent addition to the lexicon of employment contracts. That’s right kids, I’m so old that when I first started looking at proxy statements, employees and executives typically received the same benefits. (I’m not that old.)

• Section 3.7 relates to his “life insurance policy providing for a death benefit of U.S. $2,500,000.00 . . . . and (b) a disability insurance policy providing for monthly payments to you of U.S. $12,800.00 . . .” That annual disability payment would be over $153,000 a year. I don’t have the actuarial knowledge to determine how much you would have to pay to get that kind of insurance for a 55 year old man, but I expect it would be significant.

Small independent bookstores have been making a comeback lately, but the large chains are struggling. There are many theories as to why this might be. Perhaps careful readers can find some clues above.

Analysis of the vote at Blackrock

Vote analysis:
At Blackrock’s annual meeting on May 25, over 6 million shares were voted in favor of the Steven Silberstein trust proposal on proxy voting practices on compensation. Among those that publicly supported the proposal were pension giants CalPERs (the California Public Employees’ Retirement System) and OPERS (Ohio Public Employees Retirement System).

The proposal also gained the attention of the press. It has been covered by New York Times, the Financial Times, Bloomberg, the Nation, and Financial Advisor, and others.

The shares voted in favor of the proposal represented significant shareholder support, and exceeded a threshold established by the SEC that prevents low-support proposals from being refiled.
However, there were several factors that tampered the overall percentage of support.

– The largest shareholder at Blackrock, PNC which controls 21.2% of shares has a signed agreement that guarantees it will not vote in favor of shareholder proposals. Specifically, “PNC has agreed to vote all of its voting shares in accordance with the recommendation of the Board of Directors on all matters.”

– Blackrock’s attempt to have the proposal excluded at the SEC, and the extraordinary time it took for the SEC to make a decision (discussed more fully below), limited the proponent’s ability to engage on the issue. His attempts to discuss the proposal on its merits were thus turned down by ISS, Glass Lewis and a number of public pension funds. Both ISS and Glass Lewis recommended against the proposal.

– The proposal was new, and its intent may not have been clear to all shareholders. The Pensions and Investment Research Consultant (PIRC), a large European advisor, recommended against it despite their own excellent record on opposing high pay. “If the resolution were intended as a vote of censure for a perceived failure to put principles into practice and a call for a change in guidelines, it should have been framed differently.” The crafting of the language will be revisited in the coming year, though advocates fear that a proposal more explicit may have been excluded at the SEC.

– Some shareholders may have given Blackrock deference because of its power. In an analysis we completed prior to the meeting we noted that the average vote for Blackrock’s directors at the 2015 meeting was in the top 50 of all S&P 500 companies. A number of companies that received higher votes were controlled/dual class voting companies (for example, Hershey). Even on routine issues there may be an element of “Let’s not vote against Blackrock” that goes on given the complicated and complicit nexus of powerful individuals in the finance industry.

Structural issue of timing around no action letters created a significant hurdle. Blackrock submitted opposition to the proposal on January 22, 2016, arguing that even asking for a report on policy considerations was an infringement on the ordinary business of the company. The SEC did not make its decision, disagreeing with Blackrock, until April 6. The late response meant that little time for engagement, and in at least one case eliminated the option due to an advisor’s policy.