Despite their efforts to grant Wal-Mart shareholders proxy access and an independent board chairman, six titanic pension funds were unable to sway the vote in favor of certain proposals at the retail giant’s annual meeting last Friday.
The pension funds included the $322.3 billion California Public Employees’ Retirement System; $206.5 billion California State Teachers’ Retirement System; $189.4 billion Florida State Board of Administration; C$316.7 billion ($235.4 billion US) Canada Pension Plan Investment Board; $133.2 billion Texas Teacher Retirement System; and the C$175.6 billion ($130.4 billion US) Ontario Teachers’ Pension Plan. While five of the funds supported both proposals, the Ontario Teachers’ Pension Plan supported only the proxy-access proposal.
“We consider it (proxy access) a shareowner right. It’s increasingly being adopted by quite a significant section of the S&P 500. Small companies usually lag behind that adoption, but for companies the size of Wal-Mart, it’s significantly taken adoption. Independent chair is another fundamental governance concept that we typically endorse,” said Jacob Williams, Corporate Governance Manager, FSBA. “When you have the strong chairman and the strong CEO, you have greater perspective for the company to have two separate individuals in situations where they can work with each other proactively, strengthening the equality and perspective of the board.”
The six plans also were against the compensation ratification of C. Douglas McMillon, Wal-Mart’s CEO and president, as well as four other named executives. McMillon’s total 2016 compensation was $22.4 million, a 13.13% increase from 2015’s $19.8 million.
“We feel pay relative to performance is a key fundamental tenant for us. We had some concerns about the stringency of the compensation awards,” said Williams. “Really, for us it’s important that performance is aligned with the incentives of shareowners, not just management but also the shareowners returns. If the compensation metrics and the goals and the target levels are not stringent enough to motivate performance at the level to reward shareholders, that’s always a concern to us.”
Although the entities pushed for the proxy access, which would allow shareholders to nominate their directors, and independent chairman proposals, only 15% and 26% of shareholders, respectively, took their suggestions to heart. Eighty-three percent of shareholders voted in favor of the executive compensation proposal. According to a May report, proxy-advisory firm Institutional Shareholder Services also sided with the pension plans’ suggestions.
“If the board listens to shareowners over time, we may see some additional adoptions. It’s relative to the stock performance and the shareowners view of the board, which can change over time,” Williams said. “We weren’t sorely disappointed but we’ll keep an eye out for next time.”