Proxy Blog

Discover Financial Services 

May 3, 2019

The annual proxy for this financial services company had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposals on eliminating supermajority voting requirements and granting shareholders the right to call special meetings 
  3. Shareholder proposal on establishing a 15% threshold for calling special meetings 

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 did not address shareholder engagement. The peer group was listed, though the criteria for inclusion in the peer group was vague and susceptible to gerrymandering. 
  2. For the board proposals.
    -Eliminating supermajority – Requirements for supermajorities within governance guidelines tend to exist to protect the status of a powerful minority and hence are not consistent with strong shareholder relationships.  Occasionally, such requirements are helpful in fending off hostile takeover attempts or can be a useful tactic in optimizing valuations when selling the company. Since the board seeks to remove the requirement, the board does not think the benefits associated with the potential occasional need are worth the costs in lower-quality governance. It is easy for Magni to support this proposal. 
    -Granting shareholders the right to call special meetings  Strong shareholder relationships are part of good governance. The ability of shareholders to call special meetings is usually available in well-run companies. 
  3. For the shareholder proposal on allowing shareholders to call special meetings with 15% threshold. Good governance means open communications with shareholders.