The annual proxy for this oil and gas company had the following proposals:
- Proforma proposals on directors, appointment of auditors, and “say-on-pay” advisory vote
- Shareholder proposals on independent chairman, special shareholder meetings, board matrix, climate change committee, Gulf Coast risks, political contributions, and lobbying
Magni voted as follows:
- 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 document the shareholder engagement activities, including discussions involving compensation. The peer list is shown, though the criteria is vague and the language surrounding the chart showing the size of Exxon compared to the peer group is disconcerting. The language effectively says the peer group is ignored because Exxon is so much larger than the members of the peer group.
- For and against shareholder proposals.
-For independent chairman – The independence of a board of directors is part of good governance. Separation of the chairman and CEO roles is usually a good part of maintaining independence.
-For special shareholder meetings– The proposal is about lowering the threshold to 10%. Good governance means open communications with shareholders.
-For board matrix – Last year the proxy had a similar proposal, however it was only focused on diversity metrics. This year’s proposal seeks to require the company to publish in the annual proxy a broader set of key information about each director and to do so in a matrix format. The company acknowledges that some aspects of the shareholder proposal make sense and made changes to this year’s proxy. None of the information requested in the proposal is difficult or inappropriate for publishing. The information is readily available, and the costs of publishing are minimal.
-For climate change committee – Climate change is a big issue. That said, a board committee is a big change for the company. The vote on this proposal was difficult. The deciding factor was the company’s historical resistance to the topic of climate change. To assure better board discussions about climate change, Magni voted in favor of the proposal.
-Against Gulf Coast risks – The proposal seeks additional reporting on risks specific to the Gulf Coast. The explosion of a well from another oil company is deemed the reason for the needed reporting. This company has a very strong track record on safety with much stronger operational controls. Magni does not see the need for this extra work.
-For political contributions – Transparency is critical to good governance. Political contributions should be disclosed. This company is not very transparent about the current efforts and expenditures.
-Against lobbying– As opposed to the prior shareholder proposal about political contributions, this proposal focuses a lot of attention on industry and trade organizations. It is in the shareholders’ interest for the company to be active in such groups. A lot of the activities and funding go to issues unrelated to politics.