The annual proxy for this financial services company had the following proposals:
- Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote
- Shareholder proposals on proxy access; becoming a public benefit corporation; requiring reporting on incentive-based compensation and risks of material loss; and racial equity
Magni voted as follows:
- For and against proforma proposals:
–For directors – The disclosures in the proxy meet the criteria in Magni’s policy on election of directors.
-For auditors – The company meets the criteria in Magni’s policy on auditor ratification.
-Against say on pay advisory vote – The disclosures in the proxy did not meet the criteria in Magni’s policy on the advisory vote.
- For and against the shareholder proposals.
–For proxy access – The shareholder proposal seeks to make proxy access easier for shareholders. Easy access is part of good management of shareholder relationships. That said, we use the quality of governance to select equities. As such, the proxy where we vote involve companies with good governance practices. Wells Fargo has good governance practices in many areas; however, there have been some notable scandals in parts of the company. The scandals hurt the value of the company and documented inadequate stewardship of company resources. Lowering the threshold for proxy access enables shareholders to more easily communicate changes to strengthen management’s attention of stewardship of resources.
-For becoming a public benefit corporation – The shareholder proposal seeks to have the company change its registration to a public benefit corporation. Such a change would require the company to be explicit in how it manages its shareholder relationships. Well governed companies usually do a better job of managing those relationships. Clearly, Wells Fargo has demonstrated gaps in its management of customers and employees. Had the company documented what it had done to strengthen its management of the customer and employee relationships following recent scandals, we would have voted against this proposal. Instead, the company response was defensive.
-Against reporting on incentive-based compensation and risks of material loss – The proposal is a very intrusive reporting request. Shareholder proposals are not a substitute for operating management. Further, the company has improved in this area, and those improvements were documented in the company response. While the proposal is well intentioned, a less intrusive request which respects the role of shareholder proposals would be more likely to obtain support.
-Against racial equity – The shareholder proposal identifies some minor issues in the company. In turn, the company identified its extensive efforts in the area, including external evaluation of current programs. We would rather see the root causes of the recent scandals get addressed. Should the company have new racial controversies or fail to continue to make progress, we would be supportive of future shareholder proposals along the lines of the current one.