In our efforts to serve our clients, and society in general, we vote our clients’ Proxies when and where applicable. We do this because most investors do not have the desire/time to follow through with this important process. In addition, we have found that there is an overwhelming tendency of existing shareholders to “rubber stamp” the board of directors recommendations, when they do vote, because the process has become so onerous. We hope our example will help to influence more firms to vote their clients’ proxies and to start to hold mutual fund (and other management) companies accountable for their votes on our behalf.
We are a small firm and do not have the resources to fully research every issue, biography for every nominee, or the entire past histories of the various companies/funds that we must vote on, but we do work very hard to read almost all of the Proxy Statements, Annual Statements, and current prospectus available to try and make more informed decisions.
Please read below to see a brief summary of our process in voting on your behalf:
Building stronger companies that are accountable to shareholders and society:
Generally, after digesting the applicable information that we gather, we look to vote for issues that will be in favor of shareholder interests that reinforce good corporate governance. Because what this comes down to is that our large, publicly traded companies are the embodiment of a lot of all of our hard work and savings. They are responsible to us, society, and it is up to us to make sure that they know that we are watching and have high expectations for them. We vote for our clients so that they know that by hiring us they are fulfilling this important responsibility.
Our stance on executive compensation:
We believe that current levels of executive compensation are significantly out of line with the value of services provided. Furthermore, the increase over the last couple decades have been completely out of line with value brought to shareholders while not participating in the risk that shareholders have taken.
There should not be golden parachutes for failed/fired executives. Furthermore, if you are going to award executives huge windfalls when times are good then their personal wealth (actually owing shareholders compensation for poor performance) should be on the line proportionally during the down times.
While we do not disagree that there are great people out there leading our public corporations it is unarguable that any individual should be compensated more than $1-2M/year without risking their own capital (if they want to make huge profits and they believe in their own abilities than they can purchase large positions in the company’s stock and benefit from their successful leadership) and we see it as a gross abuse of power/authority that any board of directors authorizes amounts in excess of this (even if it is in stock/options awards, because they are still diluting shareholder equity).
Thus we will almost always vote down any compensation plan that violates the above principals. If shareholders don’t hold executive management and boards of directors accountable there will never be a change here. And to argue that there aren’t great people that would be happy to work for this great salary and the opportunity/challenge to lead the world’s great companies into the future is absurd.
Our stance on electing boards of directors:
This is our most difficult task because we know almost none of these people, but it is arguably the most important thing we do in voting our shares. Unfortunately, we cannot truly judge their character, which we find to be the most important characteristic of leaders, so what we try to do is to find people that have applicable skills/experience that would most benefit the company in question, make sure that they do not have any ethical black marks (that we can find), and have the least amount of conflicts of interest. For example:
We find almost no reason that anyone on the executive management team needs to be on the board of directors and we will generally vote against this (exceptions occasionally for founders of companies).
We would also vote down anyone that we felt could be unduly influenced, coerced or bullied by any executive management member.
We also do not want leadership teams on competitors’ boards of directors or executive management (or vice-versa).
The list is not exhaustive, but we hope you get the drift.