Proxy Blog

Quest Diagnostics 

May 3, 2018

The annual proxy for this clinical laboratory had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Management and shareholder proposals on threshold for special meetings 

Magni voted as follows: 

  1. Magni voted for the 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 proxy materials demonstrated that the board has more than considered shareholder feedback on executive compensation. In addition, the proxy materials disclosed the benchmarking done on executive compensation, including listing the peer group used in the benchmarking.

  2. Magni voted for the management and shareholder proposals. Shareholder engagement is an important part of good governance. Special meetings are a way for shareholders to make sure the board understands shareholder expectations. A low threshold encourages shareholder engagement. The primary objection of boards to lowering the threshold is the cost of holding special meetings. Given that special meetings rarely occur, the objection is hypothetical as opposed to substantive. The threshold in the shareholder proposal is lower than the threshold in the management proposal. Either proposal is an improvement, though the shareholder proposal is better.