Proxy Blog


May 8, 2018

The annual proxy for this oil and gas company had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on:
    -Disclosing methane emissions
    -Independent chairman
    -Threshold for special meetings
    -Lobbying disclosure
    -Not doing business with conflict-complicit governments
    -Transition to a low carbon economy
    -Independent director with environmental expertise 

Magni voted as follows: 

  1. Magni voted 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” Advisory Vote. 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 disclosing methane emissions – Transparency is an important part of good governance and methane emission is a significant environmental issue.
    -For independent chairman – An independent board is an important part of good governance. An independent chairman is an element of an independent board, though there are situations where an independent chairman does not make sense (e.g., Elon Musk and Tesla). Chevron does not have one of those situations.
    -For lower 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 lobbying disclosure – Chevron already provides significant lobbying disclosure. The shareholder proposal was mainly targeted at an organization called ALEC. The merits of ALEC can be debated; however, those debates belong elsewhere. Transparency is an important part of good governance and Chevron is already transparent.
    -Against not doing business in conflict-complicit governments – Conflict-complicit governments are a significant issue. Preventing an American business from doing business there is more about making a statement of values than about changing the situation. American businesses can be a force for good. Chevron should stay engaged in those countries and Chevron should be active in creating the conditions for change in those countries.
    -Against transition to a low carbon economy – The shareholder proposal requests an expensive analysis. Carbon is an important environmental issue. Chevron already provides significant environmental disclosure. Environmental policy is a country governance issue more than a corporate governance issue.
    -Against independent director with environmental expertise – Chevron already includes environmental skills as a factor in candidate selection. Good governance involves having an independent board, giving them the authority to make good decisions, and holding them accountable for the quality of their decisions. If the board is not recommending candidates with sufficient environmental qualifications, then the shareholders should vote against the slate of candidates.