Proxy Blog

Caterpillar Inc.

May 16, 2019

The annual proxy for this construction equipment manufacturer had the following proposals: 

  1. Proforma proposals on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on proxy access and conflict-affected areas 

Magni voted as follows: 

  1. For and against proforma proposals.
    -For 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.
    -For auditors  There appear to be no controversies with the financial statements of the company.
    -Against say-on-pay”  The proxy materials did not disclose any shareholder engagement activities. The peer group was listed; however, the criteria were high level and the company was not compared to the peer group on relevant metrics. 
  2. Against shareholder proposals.
    -Proxy access – The existing practices are comparable to other companies with good governance. The shareholder proposal effectively provided for a director to stand election repeatedly over many years, despite being nominated by shareholders representing a small minority of shares and the candidate receiving a few votes in each election.
    -Conflict-affected areas – Any company is at risk when its operations occur in regions of the world where there is conflict. Companies should not avoid those locations, especially companies such as this one where its products are an important part of making the location better. Companies need to have good governance to minimize risks. This proposal acknowledges that Caterpillar considers this issue important and that it has a history of good conduct. The proposal would require the company to go further to mitigate risks, though the nature of such an effort is unclear. Asking a company to do some undefined task when it is already doing a good job is not a wise allocation of company resources.