Founder boards, plus Zaslav’s payday, and the death of shareholder proposals

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PROXY COUNTDOWN

Free Float Media, Inc.

60 episodes

3 weeks ago

The silent female retreat The not-so-secret power of the lead independent director An aggressive activist atmosphere is heating up A college professor in a bow tie gets voted out And on the Big Vote, Matt talks Surveys Trade Wire - BUY/SELL Top Stories: proxy countdown_trade wire_2025 - Google Sheets Tracking Noteworthy 8-Ks since September 24th: DIrector comings and goings: Men added: 22 Men subtracted: 7 Women added: 6 Women subtracted: 5 Down to 2F: Fannie Mae: Karin Kimbrough resigned Down to 1F: F&M BANK: Daphyne S. Thomas retired Rocket Companies, Inc. (RKT): Jennifer Gilbert resigned; appointing Mr. Jay Bray to serve as a Class II director and Mr. Tagar Olson to serve as a Class I director Pitney Bowes: Milena Alberti-Perez resigned (Julie Schoenfeld resigned in July) Stupidities/Oddities: IDEXX LABORATORIES INC /DE (IDXX) elected Karen Peacock Ms. Peacock will stand for election by stockholders as a Class I Director at the Company’s 2027 IonQ, Inc. (IONQ, IONQ-WT) appointed John W. Raymond General Raymond was appointed as a Class I director whose term will expire at the Company’s 2028 Annual Meeting of Stockholders Rocket Companies, Inc. (RKT) appointing Mr. Jay Bray to serve as a Class II director until 2028 Mr. Tagar Olson to serve as a Class I director until 2027 F&M BANK CORP: Daphyne S. Thomas: Upon reaching the mandatory retirement age, Ms. Thomas became an honorary director and will continue to function as such until she tenders her resignation to the board or until the board requests that she tender her resignation. Under Section 2.11 of the Bylaws, an honorary director may attend board meetings but is not entitled to vote. NEOs Disney: Sonia L. Coleman, the Company’s Senior Executive Vice President and Chief Human Resources Officer, changed title was to Senior Executive Vice President and Chief People Officer increased Ms. Coleman’s annual base salary to $1,000,000; increased her target annual bonus opportunity to 175% of her base salary; and increased her target long-term equity incentive annual award value to 375% of her base salary CEOs COMCAST CORP: Michael J. Cavanagh will be appointed Co-CEO along with current CEO and Chair Brian Roberts, the son of Comcast founder Ralph Roberts VERIZON COMMUNICATIONS: lead director Daniel H. Schulman succeeding Hans E. Vestberg Money Norfolk Southern: One-time cash retention to all NEOs Mark R. George—$4,000,000; Jason A. Zampi—$2,250,000; John F. Orr—$3,000,000; Claude E. Elkins—$2,000,000; and Anil Bhatt—$2,000,000 Pepsi CFO Golden Hello: $9M Strategy Inc: increase to the annual cap for the security program maintained for Michael J. Saylor, Executive Chairman/former CEO/co-founder, under which the Company covers certain security-related costs. Previously, the annual cap for this program was $1,400,000; effective in calendar year 2025, the cap will be increased to $2,000,000 Dell Technologies: one-time performance-based stock option award to COO Jeffrey Clarke valued at $132.4M CSX CORP: appointed Stephen Angel as CEO; $10.1M golden hello PROXY CAGE MATCH Activist investors launched a record number of new campaigns in Q3, with 61 new campaigns, up sharply from 36 a year earlier. Barclays’ new data show that activism is accelerating globally, with a 90% quarter-on-quarter increase in the U.S. Year-to-date figures indicate nearly 191 campaigns targeting 178 companies, with activists securing 98 board seats and driving approximately 25 CEO departures thus far Japanese game company GungHo Online Entertainment, has rejected a proposal from activist investors to dismiss its longtime CEO Kazuki Morishita The proposal was put forward by Strategic Capital, a Tokyo-based investment fund which controls over 11% of GungHo’s voting rights. During an extraordinary shareholders’ meeting held at its request on September 24, the activist pushed for: 1) the requirements for ousting an executive to be relaxed 2) for Morishita to be fired from his position as CEO. While the first proposal was accepted, the attempt to remove Morishita failed, not gaining enough votes from majority shareholders. Irenic Capital Management, which owns about 2% of Workiva, wants board and governance changes: Specifically, the hedge fund is urging the company to collapse its dual-class share structure, make all board members stand for election every year and add two newcomers, including Irenic executive Krishna Korupolu, to the board. The hedge fund also expressed considerable concern about the company's governance, noting that five of its seven directors have served on the board since 2014. Acadia Healthcare has appointed Todd Young as CFO, amid growing pressure from activist investors Khrom Capital and Engine Capital — which together own more than 8% of the company VOTE RESULTS TABLE Freedom Holding Corp. (FRHC) 0 SHP classified; Philippe Vogeleer 99.2% FEDEX CORP (FDX) 1 SHP: independent board chairman 43% yes 97% yes; Smith 10% NO 37% NO pay PAUL S. WALSH (CHAIR) 94% Silvia Davila 97% Susan Patricia Griffith 98% Amy B. Lane 99.5% Susan C. Schwab 96% GENERAL MILLS INC (GIS) 2 SHP Regenerative Agriculture Practices Within Supply Chain 27% YES Separate the Board Chair and CEO Roles 36% YES avg 97% YES RPM INTERNATIONAL (RPM) 0 SHP 99.7% YES Craig Morford; 9/12 up for election as company in process of declassification CARPENTER TECHNOLOGY CORP (CRS) 0 SHP Classified at John Wiley & Sons: 54% said NO to Governance Committee Chair Brian Hemphill The Board, upon recommendation of the Governance Committee, determined not to accept Mr. Hemphill’s resignation: “The Board concluded that the voting outcome reflected proxy advisory firm recommendations unrelated to Mr. Hemphill's individual performance or contributions. The Board determined that Mr. Hemphill's continued service is in the best interests of the Company and its shareholders” THE BIG VOTE PICKS DAMION Upcoming Meetings September 29- AGM Date Company SHPs # Notes 10/13 MillerKnoll Inc 0 Classified: 3 dirs 10/14 Procter & Gamble 1 As You Sow: Plastic Packaging 23% 10/16 Medtronic 0 Irish 10/16 CACI International 0 no Say on Pay; 3 directors Matt SURVEY SEASON Executives PwC Board Effectiveness Survey - August 2025 All NEOs, ~500 of them Biggest representation in tech/media (23%) Mostly mid (35%) and large (26%) companies Directors PwC Annual Corporate Directors Survey - October 2025 More than 600 directors surveyed Mostly mid cap (33%) and large cap (37%) Mostly men (65%) - and no question about race/ethnicity Mostly longer tenured (6+ years, 56%) Asset Owners Morningstar’s Voice of the Asset Owner Survey 2025 - October 2025 500 asset owners, 19tn in assets Mostly EU and APAC, 20% US Mostly 1-100bn in assets SURVEYS SAY… How important is voting out a director? Executives: 93% of executives say at least one director should be replaced, 78% say 2 or more Directors: 55% think AT LEAST ONE should be replaced, and 7% of directors - nearly 1 in 10 - think MORE THAN TWO directors Investors: 35% said they voted - IN EITHER DIRECTION - at all To put that in perspective, investor voter turnout is roughly equivalent to voter turnout in Syria (37%) Are boards any good? Executives: 35% of executives rate their boards as “excellent” or “good” IT executives think their boards are the WORST - only 21% think they’re effective at all, and 40% think they’re straight up “Poor” Directors: 68% of board Boards think they have an effective assessment process Investors: only 35% of investors said board composition was material AT ALL, much less worrying about how effective those boards were Are we culling directors that suck? Executives: 50% of executives feel confident a board will remove an underperformer Directors: 34% of directors think the chair/lead director is “very effective” in dealing with underperforming directors - the lowest of the options Investors: Only 35% even VOTE, and the average vote for a director is 96% in favor - 0.2% of directors annually are voted out Why aren’t we cutting directors exactly?? Executives: 57% said “Board leadership is unwilling to have difficult conversations with underperforming directors”, while 48% say “Individual director assessments are not performed” This checks out - only 27% of directors said as part of the assessment process, they did individual assessments ACTION ITEM: USE DATA TO DO INDIVIDUAL ASSESSMENTS Directors: The main reason why they haven’t been replaced is “personal relationships with board members” Investors: Only 35% even VOTE, but 52% do vote on shareholder resolutions - maybe if there was a shareholder resolution that said “do a report on individual director assessments, focusing on old, long tenured, underperforming directors”, they might actually approve a report on it since they won’t vote against a human? What makes a sucky director? Executives: advanced age, overboarding, long tenure, and unprepared for meetings When asked what a coaching a board chair should give underperforming directors: 36% say “not actively participating in discussions”, and 33% say dominating discussions Directors: “does not meaningfully contribute to discussions” and “long tenure” Investors: only 14% of asset owners find it “very useful” to do stewardship, which includes voting proxies, and 16% said they “don’t know” if it’s useful - the only time we see votes against consistently is for attendance and overboarding (like SUPER overboarding) What’s the most important issue? Executives: Executives are asking boards to spend more time… on ESG? 50%, the highest overall ask. What keeps them up at night is talent management (18%) Directors: 34% said they plan on adding “industry expertise” - which suggests 1 in 3 boardrooms might have none? Investors: Business ethics remains number 1, and is the TOP RANKED material issue of every issue they asked - 68% of asset owners agreed What do boards need? Executives: 37% said more education Directors: 45% said more education Investors: Not asked because they don’t care Other fun survey tidbits… Only 15% of executives think the board has sufficient gender/racial/ethnic diversity, while… 25% of directors thought they could improve the board by seeking “more diverse viewpoints” Boards think - at a 94% plus rate - their interactions with management were very or somewhat effective, including “developing relationship with management outside of the boardroom” So what do you do with this, investors? Executives WANT YOU TO VOTE OUT DIRECTORS Directors ALSO WANT YOU TO VOTE THEM OUT ACTION: VOTE OUT DIRECTORS - find underperformers, long-tenured or over-aged directors and swap them - only directors care about “collegiality”, executives don’t care because they need diverse viewpoints ACTION: Stop obsessing over shareholder proposals - they don’t matter nearly as much as you think they do investors Directors themselves seem like they don’t have enough expertise on the industry where they’re a director, and investors are worried directors are in it for themselves (ethics) while executives need them to think about exogenous risk (ESG) ACTION: It’s time to marry skills of directors to companies, looking for the exogenous long term risks facing an industry - use data to find them! ACTION: Don’t ask about AI skills on the board, they have to manage ALL exogenous risks over the long term, AI among them - when you myopically focus on just one, you miss the next wave of risk

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Founder boards, plus Zaslav’s payday, and the death of shareholder proposals

PROXY COUNTDOWN

49 minutes 13 seconds

4 months ago

Founder boards, plus Zaslav’s payday, and the death of shareholder proposals

Trade Wire - BUY/SELL Top Stories: The money In response to angry shareholders: Two weeks after 60% of Warner Bros. Discovery shareholders rejected CEO David Zaslav’s $52M pay plan, the Compensation Committee restructured his plan using Hollywood’s latest CGI, special effects, and most seasoned stunt doubles: his new plan reduces his annual pay targets significantly–from $37M to $17M if he hits 100% of his targets–but the devil is in the details as he is eligible for $37M if he reaches 200% of his targets and is getting a massive option grant of 21 million shares at an extremely low strike price of around $10 per share, giving him the theoretical opportunity to make $1.4B if Warner Brothers’ share price regains its 2021 high of $77. To walk in the door: Ciena Corporation’s new CFO Marc D. Graff will get $2M in cash and $10.5M in time-vesting equity. While Arista Networks’ new COO Todd Nightingale is welcomed with $32M in equity, $30M of which vest simply over time without any performance-based conditions: an amount which is 92 times greater than his base salary. Boeing’s longest-tenured director Lynn Good joins the Board of Morgan Stanley just two days after the crash of a Boeing 787 Dreamliner in India killed more than 200 people. Yum! Brands CFO Christopher Turner has been promoted to CEO to replace David Gibbs. In doing so, the company skipped right over Chief Operating Officer and Chief People & Culture Officer Tracy Skeans who has been at the company 20 years longer than Chris and in her dual roles oversees two key industry areas of risk in customer experience and labor management. Maybe we have Yum! Brands Chair Brian Cornell to thank for this decision? As CEO of Target Brian has overseen the company’s recent demise due partially to customer-alienating decisions surrounding the lack of support for Gay Pride and the sudden abandonment of the company’s DEI policies due to the perceived threats from a US election. At Yum Brands’ annual meeting last month Chair Cornell received 17% votes against his reelection, more than 3 times greater than any other director. Continuing to follow the trend of large cap companies with only 2 women on the board: Thomas Frist, III is stepping down at VeriSign, a board with only two women. Will they take this opportunity to replace him with a woman? Same thing at Nutanix where Brian Stevens just stepped down on a board with only two women And at Live Nation Entertainment where Greg Maffei’s 33% influence just left the board. Affirm Holdings, however, is keeping the board at two women ignore the problem by replacing retiring director Keith Rabois with Richard Galanti, keeping its board below the accepted minimum threshold of three women on the board. And finally, Pitney Bowes has cleverly circumnavigated shareholder approval as it appointed Brent Rosenthal to its Board only a month after its annual meeting in May. PROXY CAGE MATCH Activist investor , which owns about 1% of Victoria’s Secret, is arguing that the company has failed to realize its potential since its separation from its parent company, L Brands, in 2021. Specifically, CEO Hillary Super “has limited chief executive and public company experience with only a brief tenure in intimate apparel.” CEO Hillary Super (September 2024-) CEO, Savage X Fenty, intimates retailer, 2023 – 2024 CEO, Anthropologie Group, 2020 – 2021 Global President, Anthropologie Group, 2019 – 2020 Co-President, Anthropologie Group, 2018 – 2019 President of Women Apparel, Accessories, Beauty and Bridal, Anthropologie Group, 2017 – 2018 Six directors sat on the board during the company's decline and the remaining two independent directors "have limited experience successfully scaling global consumer businesses … We believe that Victoria’s Secret requires a reconstituted Board comprised of directors with proven experience in brand revitalization, operational execution, international expansion, and shareholder value creation … “ [the retailer] should consider replacing a majority – if not all – of the Board with independent directors who bring relevant backgrounds, fresh perspectives, and a strong track record of value creation." 8F/2M Chair Donna James, (2021-); (L Brands: the former parent company of VS&Co, 2003 – 2021) Chairman George Mayes was voted out and then resigned at Forward Air’s annual shareholder meeting last week. Directors Javier Polit and Laurie Tucker have also stepped down despite receiving a majority vote. The Board has appointed Jerome Lorrain as Executive Chair and Paul Svindland as Lead Independent Director. Ancora Holdings, which owns a 4.1% stake, previously said the three “unfit legacy directors” cannot be trusted based on their “history of inaction, failed oversight and highly problematic decisions,” blaming them for the company’s decision to pursue the Omni Logistics acquisition in August 2023. VOTE RESULTS TABLE Here are the highlights from 45 large-cap annual meetings over the past week: 30 total SHPs: but from only 13 companies, meaning 32 meetings had zero SHPs Nearly half (13) came from Alphabet only 3 on G 4 on AI equal shareholder voting 31% YES (highest YES vote) A stockholder proposal presented at the 2025 Annual Meeting but not included in the 2025 Proxy Statement regarding a report on implementing AI app preload capabilities into Android OS 0.000273% YES (lowest) 342|12,515,614,679|1 27 of 45: zero shareholder proposals and zero shareholder dissent. Only 2 wins overall: Fidelity National Financial: elect each director annually 93% YES MONOLITHIC POWER SYSTEMS: call a special shareholder meeting 58% YES 7 “moral” victories (over 30%): Alphabet: equal shareholder voting 31% YES 96.1% of Class B shares (10 votes) held by Larry Page/Sergey Brin/Eric Schmidt/John Doerr=57.3% voting power; 73% on non-class B voted YES Marvell Technology: Independent Board Chairman 38% YES CORPAY: independent Board chair 39% YES Fortinet: require that two separate individuals hold the office of Chairman of the Board of Directors and the office of the Chief Executive Officer 42% YES Fidelity National Financial: (MGMT Prop) redomestication of the Company from the State of Delaware to the State of Nevada 34% NO Chipotle Mexican Grill: 45% NO on Pay “One-time retention awards” on August 2024 after Brian Niccols left: $38M aggregate to NEOs CORPAY: 47% NO on Pay The shareholder disconnects: Chipotle Mexican Grill: lowest director 4% NO Fili-Krushel & 45% NO on Pay Target: lowest Cornell 9% NO and Stockton 5% NO The shareholder connects? Marvell Technology: Independent Board Chairman 38% YES CORPAY: independent Board chair 39% YES Fortinet: require that two separate individuals hold the office of Chairman of the Board of Directors and the office of the Chief Executive Officer 42% YES The directors : 5 over 20% Regeneron Pharmaceuticals: Brown 27% NO (classified) Natera: Gail Marcus 29% NO; Roy Baynes 19% NO (classified) Pure Storage: 64% NO Scott Dietzen; 21% NO Charles Giancarlo; John Murphy & Greg Tomb 18% NO (classified) Dietzen Vice Chairman and Former CEO (2010-2017) and on Nomination and Risk Committees; referred to as "Independent" CORPAY: Joseph W. Farrelly 26% NO Alphabet: Larry Page 19% NO (44% NO) Page/Brin 52% Voting Power The oddities: The oddities: THE BIG VOTE PICKS MATT NVIDIA Founder firm, top of its game, on any given day largest company in the world at 3.5tn cap - with no governance of its founder Could Nvidia be the next Tesla? Similarities: AI meme wave - trades at a 40-50 P/E ratio, which was a 140 P/E (Tesla traded at 40-50x before they started losing money, now at a 180) Deeply entrenched boards (more on that) Deeply oversized pay packages Stanford Both immigrants Deep relationship WITH Musk Outsized, leather jacket wearing CEOs Kissed Trump’s ass about tariffs From 2018: US chipmaker Nvidia's founder and Chief Executive Jensen Huang said curbing China's technological development could not be achieved by adopting heavy tariffs. From May: “Obviously, I don’t know all of his ideas, but let me tell you about two that are incredible,” answered Huang. "The first one is utterly visionary. The idea of tariffs being a pillar of a bold vision to re-industrialize to onshore manufacturing and motivate the world to invest in the United States is just an incredible vision.” Deep dive into founder boards - who do we hire to work with outsized, unique, long-term founders Defining “Founder boards” 152 US founder firms that IPOed 10+ years ago “Mature” public founder firms Not controlled companies - 1 share, 1 vote or no majority shareholder Includes Nvidia, Amazon, Tesla, not Meta, Berkshire, Oracle, Nike 1,395 US non controlled, non founder firms (the control group) Findings Surprising things that are the same between founder boards and non founder boards Same percentage of VCs on the boards on average - speaks to the importance of private markets No age differences on average No gender gap difference on average after adjusting for founder and CEO power - this surprised me When you include founder power on boards, it definitely skews to much larger gender power gaps, but adjusted shows that if NOT for the founder, you’d have near parity In fact, in the control cohort, the power gaps are better as soon as you exclude CEOs, too - the fact that men hold the vast majority of the top positions everywhere is THE LARGEST difference in power gaps on boards Solution: no CEOs on boards, you’ll have better power parity Biggest differences Founder boards skew long tenured - 15% of founder boards have more than 15 years tenure, compared to 12% of the control VCs stick around longer - 46% of VCs on the board stay more than 10 years vs. 36% for control VCs in general have longer tenure Founder boards tend to underperform on earnings, outperform on TSR Founder boards rely LESS on connections to one another - it’s only the connection to the founder that matters Summary thoughts Boards operate in one of two ways: fetishize the most powerful person in the room (founder, CEO) OR as a social club (high degree of interconnectedness) Nvidia needs governance now, not later… Nvidia is an outlier - nearly 60% of the board is long tenured, with 33% of board more than 15 year tenures - only other company this bad is Netflix at mega caps - all of which were original investor VCs Tench Coxe - like Robyn Denholm - has not only been around for 30 years, his shareholdings have made him a billionaire from just this company Harvey Jones and Brooke Seawell haven’t just been at Nvidia for more than 30 years EACH - they worked together at Synopsis in the 1990s Of the 13 directors, 8 have been on the board at least 10 years - the average tenure of the Nvidia board is 13 years, and 62% of it wouldn’t be considered independent in the UK If our advice at Netflix was to break up the lack of independence - and investors have rewarded Netflix with a lower average vote for directors than peers (94% vs. 96% average), and the longest tenured directors get 90% routinely over the last decade Just on its face, who makes decisions: Ex head of marketing for NFL and former food executive (Dawn Hudson) Ex 31 year Taco Bell executive (Melissa Lora) Two professors (John Dabiri, Persis Drell) Ex NASA engineer (Ellen Ochoa) Lawyer (Stephen Neal) Ex CIO of a drug company (Aarti Shah) FIVE 1990s/00s tech and VC bros - all bros - Rob Burgess, Tench Coxe, Harvey Jones, Brooke Seawell, Mark Stevens - most of whom have been with Jensen Huang for 30 years This is easy - break up the 90s tech VC fraternity block: Vote out Brooke Sewell Vote out Harvey Jones Vote out Tench Coxe

PROXY COUNTDOWN