Proxy Blog

3M

April 12, 2018

The annual proxy for this conglomerate had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on:
    -Threshold for special meetings
    -Target amounts on CEO compensation 

Magni voted as follows: 

  1. Magni voted for all proforma proposals.
    -Directors – The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. The compensation levels are set using a benchmarking process.
    -Auditors – There appear to be no controversies with the financial statements of the company.
    -“Say-on-pay” The proxy materials demonstrated that the board has more than considered shareholder feedback on executive compensation. In addition, the proxy materials disclosed the benchmarking done on executive compensation, including listing the peer group used in the benchmarking. 
  2. Magni voted for and against shareholder proposals.
    -For threshold for special meetings– Shareholder engagement is an important part of good governance. Special meetings are a way for shareholders to make sure the board understands shareholder expectations. A low threshold encourages shareholder engagement. The primary objection of boards to lowering the threshold is the cost of holding special meetings. Given that special meetings rarely occur, the objection is hypothetical as opposed to substantive. 
    -Against 
    target amounts on CEO compensation– The proposal effectively wants to limit CEO compensation based on the ratio of compensation between the CEO and the frontline workers. Enactment of such a proposal provides an undesirable incentive to management to automate or outsource all low-level jobs.