Proxy Blog

The Charles Schwab Corporation

April 10, 2020

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

  1. Proforma votes on directors, the appointment of auditors, and executive compensation 
  2. Board proposals on stock incentive plan and proxy access for director nominations 
  3. Shareholder proposals requesting annual disclosure of EEO-1 data and lobbying disclosure 

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. The compensation levels are set using a benchmarking process.
    -For auditors  There appear to be no controversies with the financial statements of the company.
    -Against “Say-on-pay” Advisory Vote – The proxy contains no information about shareholder engagement. The company uses a peer group that combines companies from four different categories. The approach makes sense, but the description of the process to create the peer group is minimal. There is no benchmarking of the company to the peer group. 
  2. For and against board proposals.
    -For stock compensation plan – Long-term incentive plans are a good tool for aligning management of a company with shareholder interests.
    -Against proxy access for director nominations – While the actual changes may be just fine, Magni’s vote against the proposal reflects the poor quality of the disclosure in the proxy statement. The summary materials did not identify the changes that were being made. It is not clear whether proxy access is easier or more difficult. Such disclosures are not consistent with maintaining good shareholder relationships.  
  3. For and against shareholder proposals. 
    -For requesting annual disclosure of EEO-1 data. Magni has previously voted for and against these proposals. The topic of diversity is important. If the shareholder request is generic (i.e., not specific to the company, but rather a proposal to be used with many companies), then the company has latitude to explain its approach to diversity. If the company has a good approach to diversity and provides good diversity statistics, then Magni will usually vote against the proposal. This proposal highlights the company’s lack of diversity disclosure, so the proposal is not generic. The company proclaims to consider diversity important and to have a strong program, yet the company does not explain the lack of disclosure and mainly finds fault with the EEO-1 data. The company acknowledged that this proposal achieved enough support last year to warrant investigation. The company did some sort of investigation and decided to do nothing. The company could develop a disclosure that provides more meaningful data. Until then, Magni will vote for disclosure of EEO-1 data.
    -Against lobbying activity – The company already provides good disclosures of these activities. In addition, the proposals seek to limit participation in industry trade groups. Such groups are helpful to the company.