Proxy Blog

Cummins Inc. 

April 15, 2020

The annual proxy for this power equipment company had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposal on by-law amendments 

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. 
    -For auditors – There appear to be no controversies with the financial statements of the company.
    -Against Say-on-pay” – The proxy materials discussed a shareholder engagement effort, though activity level was not disclosed, and compensation was not mentioned as a topicThe peer group for compensation benchmarking was identified, though the criteria for inclusion in the peer group was vague, and there was no benchmarking of the company against the peer group. 
  2. For shareholder proposal on by-law amendment – The shareholder statement in support of the proposal was not compelling, though the proposal did specify that non-binding votes were sufficient. The board recommendation against the proposal made some good points about existing shareholder rights and the need to give the board latitude to act quickly. That said, the board response highlighted the existing shareholder engagement program as one of the reasons that the proposal was not needed. As said, the disclosures related to the shareholder engagement program are incomplete. Further, the response did not address the proposal being about non-binding votes. When looking at the whole of the board response, the response does not address the proposal. As such, Magni voted in favor of the proposal.