Proxy Blog

General Electric Company

April 10, 2019

The annual proxy for this conglomerate had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposal to reduce the minimum number of directors on the board 
  3. Shareholder proposals on independent chairman and cumulative voting 

Magni voted as follows: 

  1. For and against proforma proposals.
    -For and against directors – This company has experienced significant issues over recent years, including the board being surprised by multi-billion dollar write downs. Souza and Tisch have been on the board long enough to have been directors when the problems occurredMagni voted against both of these directors and for the other candidates.
    -Against auditors – There have been multiple controversies regarding the company financials. For many years, the company featured non-standard financial metrics. The company received significant criticism for the metrics, yet prior management defended the metrics. Ultimately, the criticisms were validated by the financial surprises. The auditors were basically silent during the process. Fresh eyes are needed on the accounting at this company. 
    -Against Say-on-pay” – The proxy materials contain vague information about the use of peer groups. Given the other issues in the company (e.g., surprises, write downs, misleading financial metrics), it is very tough to accept opaqueness from the company. Now is the time for this company to be a leader in transparency. 
  2. For the board proposal to reduce the minimum number of directors on the board. Previously, the board had 18 directors. Even with, or perhaps because of, this large board size the prior management was able to keep key information from the board. The company has already acknowledged the board was too big. This further reduction (from a minimum of twelve down to a new minimum of seven) is a good idea. 
  3. For and against the shareholder proposals.
    -For proposal on independent chairman. 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.
    -Against proposal on cumulative voting. New approaches to voting (e.g., cumulative voting, ranked choice) have some theoretical advantages. At the same time, these approaches make the voting process more complicated and explaining results becomes more difficult. This company needs transparency and fixes to governance as opposed to a new method of voting.