Proxy Blog

Walgreens Boots Alliance, Inc. 

January 2, 2019

The annual proxy for this pharmacy-led, health and well-being company had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Board proposal to approve amended and restated employee stock purchase plan 
  3. Shareholder proposals on independent chairman, use of GAAP financial metrics for compensation purposes, report on opioids, and lowering threshold for special meetings 

Magni voted as follows: 

  1. Magni voted for all 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” – The proxy materials did not disclose any shareholder engagement efforts. The advisory vote language was pro-forma with no serious evidence that the vote matters. 
  2. Magni voted for board proposal on the amended and restated employee stock purchase plan. A stock purchase plan is mostly good for shareholders as it aligns the interests of the executives with creating value. The proxy explained the major changes included in the proposed plan 
  3. Magni voted for and against shareholder proposals.
    -For independent chairman – Per the Magni position paper, Magni routinely votes in favor of these proposals.
    -Against GAAP financial metrics for compensation purposes – This vote was a tough call. On one hand, transparency and clarity are important, so using GAAP metrics reduces the risks of misaligned or excessive compensation schemes. However, the board had a good point about the potential misalignment that can come from a strict use of GAAP financial metrics. If the shareholder proposal had instead requested a shareholder report whenever a non-GAAP metric is used and the report should include the rationale for use of the metric, then it would have been easy for Magni to vote “for”. Conversely, if the board response acknowledged the desirability of using GAAP measures and indicated a commitment to use non-GAAP measures only when a material reason existed, then it would have been easier for Magni to vote “against”.
    -Against report on opioids – The opioid crisis is a tragedy and, sadly, a manmade one. At this point the damage has been done and well-run companies should be sensitized to the issue. Whatever this company’s actual role in the tragedy, there are lawsuits, and companies may have legal liabilities. The Walgreen Boots Alliance is a relatively well-run company. The senior executives and leadership should deal with the existing issues and potential lawsuits in a forthright manner. The bigger issue is to understand governance weaknesses that could expose the company to risks on whatever the next tragedy might be.
    -For lowering the threshold for special meetings – Per the Magni position paper, Magni routinely votes in favor of these proposals.