The annual proxy for this power and energy company had the following proposals:
- Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote
- Board proposal to increase the number of authorized shares
- Shareholder proposal on independent chairman
Magni voted as follows:
- For 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 shareholder engagement and peer group disclosures indicate good governance practices in executive compensation.
-Against the board proposal to increase the number of authorized shares. The proposal would increase the authorized shares by 75%. In the explanation of why the proposal was needed, the proxy contained a statement about using the shares for strategic acquisitions. The increase in shares is too large and presents a significant dilution risk to existing shareholders. At the same time, increasing the authorized shares simplifies the board process for making a large acquisition. Large acquisitions have a low probability of creating shareholder value. Shareholders are better served by a small increase in authorized shares and retaining greater controls to prevent a large, high-multiple acquisition.
- For the shareholder proposal. Magni wrote a position paper regarding shareholder proposals for independent chairman. The recent experience of this company is evidence of the need for an independent chairman.