IBEW-NECA Proxy Voting Service 2012 Report

Greg A. KinczewskiJanuary 31-February 1, 2013 

VP/Gen.CounselThe Marco Consulting Group

IBEW-NECA Employee Benefits Conference

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Three Goals of IBEW-NECA Proxy Voting Service

Discharge trustees fiduciary duties

Engage companies to enhance shareholder value

Educate companies on benefits of union construction

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Trustees Fiduciary Duties

DOL Says:− Proxy Voting is Fiduciary Act of plan asset management − Actively influencing corporations consistent with ERISA − Can delegate to agent must still monitor

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Trustees Fiduciary Duties

IBEW-NECA Proxy Voting Service Provides− Proxy Voting Policy− Annual Explanation of All Votes Cast− Annual Executive Summary on Votes, Developments

DOL Says− Model for all Taft-Hartley Benefit Plans

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Trustees Fiduciary Duties

2011 passage of Dodd-Frank gave trustees new responsibility Advisory vote on executive compensation

− U.S. executive pay 343 times average worker

Japan

Germany

Sweden

U.K.

U.S.

0 50 100 150 200 250 300 350 400

10

11

13

25

343

Executive Compensation

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Trustees Fiduciary Duties

Results of Second Year of Widespread Say on Pay Votes− Rejections Grow From 41 in 2011 to 59 in 2012− Average Vote Ticks Upward One Percent to 91%− Focus on Underperforming/Overcompensating Outliers

2011

2012

0 10 20 30 40 50 60 70

41

59

Rejection

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Trustees Fiduciary Duties

MCG approval remains stable− 40%

Analysis goes beyond outliers− Performance or time vesting

awards?− Dilution− Golden parachutes− Excise tax gross-ups

40%

2012 MCG Approval

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Trustees Fiduciary Duties

Continual Engagement and Education is Key

16%

1987

Average Vote to Declassify Boards of Directors

81%

2012

Average vote to declassify boards of di-rectors

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Engage Companies to Enhance Shareholder Value

Shareholder proposals− Informal meetings with companies− Annual shareholder meeting

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Engage Companies to Enhance Shareholder Value

IBEW-NECA Join Coalition of 14 Activists Institutional Investors

Engage 10 Companies With Low 2011 SOP Votes− Abbott − Masco− Allstate − McKesson− Dean Foods − Northern Trust − EOG Resources − Staples− Limited Brands− Total System Services

Package of Four Reform Proposals− Independent Chair− No Gross Ups of Excise

Taxes− No Accelerated Vesting in

Change of Control− Substantial Retention of

Equity Awards

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Engage Companies to Enhance Shareholder Value

18 Go To Vote 27% Independent Chair

− Majority Vote at Mckesson

38% No Gross Ups of Excise Taxes

40% No Accelerated Vesting 22% Substantial Retention of

Equity Awards

35 proposals eligible for vote

3

8 3

3

Independent Chair

Equity Re-tention

No Accelerated

Vesting

No Gross Ups of Excise

Taxes

17 Withdrew Due to Responsiveness

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Engage Companies to Enhance Shareholder Value

2013 Plans for Coalition− Proposals will not be refiled at seven 2012 targets due to

responsiveness− Proposals will be refiled at three 2012 targets due to non-

responsiveness− Three new companies targeted for reform package− Four new companies targeted for new specific performance

standards proposal

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Engage Companies to Enhance Shareholder Value

Five Proposals Withdrawn− Independent Chair at Total System

Services− Independent Chair at Allstate− No accelerated vesting at Masco− Declassify board at Centurylink− No accelerated vesting at Duke

Energy

Eight proposals go to vote− No accelerated vesting at DirecTV,

31%− No accelerated vesting at

Windstream, 22%− Equity retention at Comcast, 11%− Independent Chair at Abbott

Laboratories, 19%− Cumulative Voting at Autonation,

15%− Equity retention at Limited Brands,

19%− Equity retention at Dean Foods, 32%− No accelerated vesting at McKesson,

44%

Specific IBEW-NECA 2012 Results

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Engage Companies to Enhance Shareholder Value

Specific Performance Standards− Abercrombie & Fitch

Independent Chair− Abbott Laboratories− Kroger

No Accelerated Vesting− Autonation− Comcast− DirecTV− McKesson− Verizon− Windstream

Equity Retention− Centurylink− Dean Foods− FirstEnergy− Time Warner

IBEW-NECA Plans for 2013

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Educate Companies on Benefits of Union Construction

On time

On budget

Meet industry standards

Minimal need for repair

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Educate Companies on Benefits of Union Construction

Annual Survey of Planned Construction By Publicly Traded Companies

Kroger Co.    1 KROGER COMPANY Tennessee Knoxville 1,980,281 Prop2 KROGER COMPANY Kentucky Lexington 2,972,500 MPl3 KROGER FUEL CENTER Virginia Virginia Beach 226,305 WoDr4 KROGER FUEL CENTER SW014 Texas Willis 600,000 WoDr5 KROGER GROCERY STORE Kentucky   1,000,000 MPl6 KROGER GROCERY STORE Virginia Richmond 7,419,781 WoDr7 KROGER GROCERY STORE 334 Texas   168,000 WoDr8 KROGER GROCERY STORE 590 Texas Crowley 500,000 WoDr9 KROGER GROCERY STORE GA-694 Georgia Milledgeville 7,823,500 WoDr10 KROGER GROCERY STORE R-514 Virginia Richmond 9,152,438 WoDr11 KROGER GROCERY STORE Y625 Arkansas Conway 3,570,000 CoDr12 KROGER STORE Ohio Columbus 5,000,000 Dsgn13 KROGER STORE Ohio Liberty Township 6,000,000 Dsgn14 KROGER STORE A402 Ohio Madeira Township 1,300,000 Dsgn15 KROGER STORE A432 Ohio Cincinnati 600,000 Dsgn16 KROGER STORE A531 Ohio Cincinnati 600,000 Dsgn17 KROGER STORE D436 Michigan Frankenmuth 1,300,000 MPl18 KROGER STORE D465 Michigan Imlay City 1,300,000 MPl19 KROGER STORE D620 Michigan   1,600,000 Dsgn20 KROGER STORE D639 Michigan South Lyon 1,300,000 MPl21 KROGER STORE D704 Michigan Shelby Township 1,300,000 MPl22 KROGER STORE FUEL PUMPS Ohio Dublin 100,000 Prop23 KROGER STORE J947 Indiana Danville 500,000 Sche24 KROGER STORE J957 Indiana Noblesville 1,300,000 Dsgn25 KROGER STORE J972 Indiana Fort Wayne 500,000 WoDr

… … … … … …

51 SMITH'S FOOD & DRUG STORE 77 Utah Salt Lake City 500,000 WoDr

Total Project Value $94,963,805

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Educate Companies on Benefits of Union Construction

MCG sends letter to HCA holdings

MCG and IBEW local 124 attend HCA holdings annual shareholder meeting

Raise issues with chairman/CEO and head of construction

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Cost of Discharging Fiduciary Duties, Engaging and Educating Companies

$3,125 per portfolio

$750 for portfolios less than $10 million

$25,000 maximum fee

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Right Thing For Fiduciary

Right thing for Fiduciary

Smart thing for Taft-Hartley Trustee

Questions?