Proxy Blog

Altria Group, Inc. 

May 6, 2019

The annual proxy for this tobacco company had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on nicotine levels and disclosure of lobbying policies and practices 

Magni voted as follows: 

  1. For the 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”This vote was tough. The proxy materials disclosed the shareholder engagement program, though the amount of activity was not disclosed. The peer group was listed, and the primary criteria used an independent industry classification of companies, though the secondary criteria was not as objective and hence open to gerrymandering. The use of an independent classification of companies is better than many companies. To receive a favorable vote in future years, the rest of the criteria for inclusion in (or exclusion) from the peer group needs greater disclosure. 
  2. For and against shareholder proposals
    -For reducing and disclosing nicotine levels  Last year’s proxy had an initiative about greater disclosure of nicotine levels. Magni voted in favor of that proposal. This year’s proposal goes further and calls for reduction of nicotine levels. Nicotine is addictive and smoking is toxic. The company should be working to mitigate the negative consequences of using the company’s products.
    -Against disclosure of lobbying policies and practices. The company already provides good disclosures of political activities. This proposal mostly seeks to lump industry group activities with political activities. There are good reasons for a company to participate in an industry group. Many of those reasons are unrelated to lobbying. Lumping all such industry activity as political is wrong.