Director attendance, plus Jay Hoag’s big vote and activist dissonance at Penn, Victoria’s Secret

What this episode covers

Trade Wire - BUY/SELL Top Stories: The money To keep working: Named executive officers at Capital One Financial get a total $43M in time-based equity “in recognition of their ongoing and anticipated work relating to the integration of the Discover business with Capital One,” including a whopping $30M for CEO and Chair Richard D. Fairbank To walk in the door: Newly hired Roblox CFO Naveen Chopra gets $6M in cash, $28M in equity, $15,000 per month through August 31, 2026 for temporary housing, and $900K for relocation expenses. Corpay’s new CFO Peter Walker gets $8.3M in equity and relocation expenses despite bailing on his last job at Instructure in less than two years. Is this like marrying the guy who was cheating on his wife when you started dating him? To walk out the door: Texas Roadhouse CFO D. Christopher Monroe is waving the white flag after less than 2 years at the job and still gets $1M. And finally, we’re tracking new ways companies are Circumventing the alternative democracy: International Flavors & Fragrances adds Virginia Drosos to the board as well as to 3 board committees only once month after their annual meeting in May The Hartford Insurance Group “elected” Thomas Bartlett a month after their meeting and immediately appointed him to the Risk Management Committee and Audit Committee And American Water Works Company didn’t even wait a month before increasing the size of the Board to nine members and appointing Raffiq Nathoo to the board and to the Audit, Finance and Risk Committee and the Safety, Environmental, Technology and Operations Committee of the Board. PROXY CAGE MATCH Penn Entertainment shareholders are getting conflicting messages from ISS and Glass Lewis on how to vote on activist investor HG Vora’s three dissident nominees: [Carlos Ruisanchez, Johnny Hartnett, and William Clifford to Penn’s board]. ISS and HG Vora are saying YES to all three while Penn and Glass Lewis are saying NO to former Penn CFO William Clifford (2001-2014). Penn is also saying they shrunk their board from nine to eight directors so don’t even bother trying: it sounds like the courts will decide this one because Clifford is running unopposed and will certainly be getting at least one vote, which makes him the hypothetical winner for the ninth chair. ISS said: “The board lacks an adequate level of direct gaming industry experience. It appears that this deficiency has hampered the board’s ability to effectively oversee management during the push into interactive … There is little evidence that the board has been able to hold management accountable, which suggests that a director who is not afraid to share a contrarian viewpoint may be a valuable addition.” Glass Lewis said: “We believe certain aspects of Clifford’s profile may overlap with existing or anticipated members of the board … The board’s assertion that his background is not sufficiently differentiated — and its unanimous decision not to support him despite backing two other dissident nominees — raises questions as to whether he would bring distinctive value at this time.” Penn said: during Clifford’s time as CFO he argued against the introduction of a loyalty program, which later became a lucrative addition to Penn’s business. And that “during his interviews with PENN’s Nominating and Corporate Governance Committee, Mr. Clifford demonstrated antiquated views of a rapidly changing industry, and the same posture of resistance to exploring value-generating solutions.” Activist investor BBRC Worldwide, which controls 13% of Victoria’s Secret, is yelling at the company’s board for “failing to adequately demonstrate meaningful accountability despite clear evidence of boardroom lapses.” BBRC is specifically targeting insufficient board independence and excessive chair tenure, namely Donna James’ 20 years as board chair: “Rather than waiting for stockholders to force change through a proxy contest, shouldn’t the Board proactively address the governance red flags that Ms. James’s tenure represents by committing to removing her as Chair immediately and refreshing the Board?” BBRC also addressed the recent cybersecurity incident that forced the company to take down its website for several days and ultimately resulted in a delay to first quarter results, an event that BBRC said “may have been preventable with proper precautions.” “The Audit Committee has been delegated primary responsibility for the Board’s oversight of cybersecurity and related risks.” Sarah Davis*: no cybersecurity expertise Donna James: no cybersecurity expertise Irene Chang Britt: no cybersecurity expertise Lauren Peters: “Cybersecurity Oversight” skill (former CFO at Foot Locker (2011-2021); only director with this skill listed VOTE RESULTS TABLE Here are the highlights from 41 large-cap annual meetings over the past week: 21 total SHPs: but from only 10 companies, meaning 31 meetings had zero SHPs 57% (12) came from Walmart (7; highest YES 7%; lowest 0.37%) and Netflix (5) 25 of 41: zero shareholder proposals and zero shareholder dissent. Only 2 wins overall: Simple Majority Voting: HUBSPOT INC (51%) NETFLIX: 78% NO Jay Hoag 4 “moral” victories (over 30%): Say on Pay ANTERO RESOURCES Corp (30% NO) DEVON ENERGY CORP/DE (35% NO) PayPal Holdings, Inc. (34% NO Equity Incentive Plan) Shareholders ability to call a special meeting NETFLIX: 42% YES for a call a special meeting proposal that was called"Proposal that Won 45% NFLX Shareholder Support"; 0.45% YES Affirmative Action Risks Say NO to Racist Shit A blatantly racist Affirmative Action Risks SHP at Netflix filed by the National Center for Public Policy Research garnered 0.45% support The shareholder disconnects: DEVON ENERGY: lowest NO 6% Mosbacher; 35% NO on Pay call special meeting: PayPal (44% YES) vs. DEVON ENERGY (8% YES) The shareholder connects? ANTERO RESOURCES: 30% NO Pay 30% NO Lead Director/Nomination Committee chair Benjamin A. Hardesty 24% NO Pay Committee Chair Robert J. Clark ESG Committee Chair Vicky Sutil 1% NO (classified) The directors : 7 over 20% NETFLIX: 78% NO Jay Hoag Expedia Group: 23% NO Craig Jacobson CG Oncology: 44% NO James J. Mulé (classified) PROCORE TECHNOLOGIES: 24% NO Brian Feinstein (classified) ANTERO RESOURCES: 30% NO Benjamin A. Hardesty; 24% NO Robert J. Clark (classified) MP Materials: Connie K. Duckworth 24% NO; Maryanne R. Lavan 19% NO; General (Retired) Richard B. Myers 19% NO (Classified) Reddit: Sarah Farrell 99.93% The oddities: The oddities: Netflix Jay Hoag (1999-; 2 years after Reed Hastings) “The Board held four meetings during 2024. Each Board member attended at least 75% of the aggregate of the total number of Board meetings and meetings of the Board committees, other than Jay Hoag who attended 50%.” The Board held four meetings during 2024 The Nominating and Governance Committee of the Board consists of four non-employee directors, Messrs. Hoag (Chair) Each member attended all the Nominating and Governance Committee meetings held in 2024, other than Mr. Hoag who did not attend one meeting. The Nominating and Governance Committee met two times in 2024. Currently holds $451M in Netflix stock Prior votes: 2024: 9% NO 2023: 23% NO 2023: overboarded: Jay Hoag is also a director at Zillow Group, TCV Acquisition, TripAdvisor and Peloton 71% NO on Pay 2022: N/A MGMT proposal to declassify the board 99.6% YES MGMT proposal to eliminate supermajority voting provisions 99.6% YES 73% NO on Pay SHP Lobbying Activity Report 60% YES SHP simple majority vote 58% YES 2021: N/A SHP political disclosures 80% YES SHP simple majority vote 90% YES 2020: 55% NO 2020: simple majority vote: “This proposal won more than 80% support 4-times at Netflix since 2013: 2019- 88%, 2016-82%, 2015 -80%, 2013 -81% But our governance committee has not yet put this proposal topic on the ballot as a binding Netflix proposal. Shareholders were not happy and gave governance committee Chairman Jay Hoag a negative vote of 48% in 2018 while he was running unopposed.” SHP simple majority vote 73% YES 2019: N/A SHP simple majority vote 88% YES 2018: N/A SHP simple majority vote 84% YES Binding SHP to amend bylaws on majority voting policy (needs 66.6% of the outstanding share): 71.4% of vote YES 2017: 49% NO 2017: “Lead Director Jay Hoag's long tenure and the fact that he was an early investor of Netflix, may compromise his independence. Less than 51% of the votes supported his election in 2014. Moreover, Mr. Hoag's Crossover Ventures provided early-stage funding to Zillow and Expedia, two companies founded by Mr. Barton. Hoag and Barton served together on the board of Zillow.” SHP repeal classified board 63% YES SHP simple majority vote 63% YES Binding SHP to amend bylaws on majority voting policy (needs 66.6% of the outstanding share): 64.2% of vote YES 2016: N/A SHP repeal classified board 83% YES SHP simple majority vote 82% YES SHP majority voting policy 87% YES 2015: N/A SHP repeal classified board 80% YES SHP simple majority vote 80% YES 2014: 49.7% NO SHP repeal classified board 82% YES SHP Independent board chair 47% YES SHP majority voting policy 82% YES 2013: N/A SHP Independent board chair 73% YES SHP repeal classified board 88% YES SHP simple majority vote 81% SHP majority voting policy 81% YES 2012: N/A SHP repeal classified board 758% YES 2011: 91% SHP majority voting policy 72% YES 2010: N/A THE BIG VOTE PICKS MATT Attendance, the stupidest of indicators: As far as I can tell, attendance is one of the primary drivers of director fail votes - and it’s such a low bar as to be laughably attainable Directors generally need to attend at least 75% of meetings - that means, roughly, 4-6 board meetings and any committee meetings… figure 20ish meetings a year, they have to make at least 15 While most companies don’t explicitly say it, the ones that do indicate that attendance can be done “in person or via video conference” - so they could be home with COVID on the phone and it counts as attendance In the last year in our data of US large cap company directors - about 550 companies and 4,700ish directors - there were 9 directors that were up for a vote (not part of an excluded class) at single class, non controlled companies that failed attendance This includes two directors that were excused from meetings for medical reasons That was 7 chances for investors to register their disgust that, even with camera off Zoom as an option, the directors could not muster the time to attend 75% of their meetings even while getting paid, on average $250,000 a year in summary pay and generally much more after share vesting The results of those votes: Not only did ZERO of those votes fail, but the lowest vote was actually 63% - not even close. In fact, Tiffany Hall at Monster Beverage got 99.67% of the vote despite failing attendance. Two things are true: first, even investors don’t hold directors to the barest minimum standard - you could take a video call from your phone in an airplane bathroom while on mute with no camera and it would count as having gone to the meeting, but seven times in 2024, directors couldn’t make more than 3/4s of meetings? You couldn’t muster enough to vote out these directors? Second, this is one of the PRIMARY DRIVERS of NO votes against directors at scale - there are basically only two reasons why investors vote no at levels greater than 20%: activist investors point out how compromised and underperforming the directors are, or they couldn’t show up to ¾ of the meetings. That’s pretty much it. Which is what makes the vote against Jay Hoag, Lead Independent Director at Netflix, so jarring… it took the litany of what Damion described for investors to finally get the courage to vote no on a 25 year tenured lead “independent” director who ignored investors for a decade. So what are investors this week going to do about this? This week you have a shot to vote NO on attendance - or to vote NO for other, better reasons: Vertiv Holdings, $27bn cap, infrastructure for data centers (cooling, racks, enclosures, etc) In the year ended December 31, 2024, all but one member of our Board of Directors attended at least 75% of the aggregate of: (i) the total number of meetings of the Board of Directors (held during the period for which he or she has been a director) and (ii) the number of meetings held by all Committees of the Board of Directors (during the periods that he or she served on such Committees). Mr. Kotzubei attended 50% of the aggregate meetings of the Board of Directors and was not able to attend the balance due to last minute emergencies and other extenuating circumstances. As further described herein, Mr. Kotzubei does not serve on any of our Committees. Director performance Jacob Kotzubei 4% influence, Vertiv and Ryerson Holding boards .570 TSR, .451 earnings Didn’t go to the meetings, but doesn’t matter much to anyone according to the influence numbers - he serves on ZERO committees? There were only FOUR board meetings for the YEAR! We know Kotzubei is connected to Roger Fradin through other boards and that’s his only source of influence in the data Paid $510,550 in summary compensation in 2024… for two meetings… roughly 255k per meeting. Assuming they were 6 hour meetings, and assuming he did maybe 8 hours of prep for each, he made $18,233/hour. Or one median Walmart employee in two hours on the board. You COULD vote out Kotzubei for missing meetings despite having so few to go to… OR… Worst board performer: Roger Fradin, .428 TSR, .471 earnings, 13% influence Connected to 30% of the board, along with David Cote Worked UNDER Cote at Honeywell for more than a decade, not even remotely independent Or.. David Cote as Executive Chair was sitting on Business Roundtable, Council on Foreign Relations, Economic Club of NY - he’s very connected, and is on the Composecure board with both Joe DeAngelo and Roger Fradin - Resolute Holdings, run by Cote, owned Composecure Cote put his son John on the Composecure board Cote was Honeywell CEO for 15 years from 2002 to 2017, lead a Goldman-backed SPAC from 2018 to 2020 when it became Vertiv He’s an executive at THREE companies - Resolute (a holding company), Composecure (which makes metal and physical credit cards), and Vertiv (which makes parts for IT infrastructure) Higher influence than the CEO - 23% to 15% Girodano Albertazzi is somehow the “CEO” of Vertiv Worked under board member Edward Monser at Emerson Electric Director skills The majority of the board is SPAC finance bros Kotzubei and Matthew Louie from Platinum Equity Jakki Haussler from Opus Capital Joe Van Dokkum from Imperative Science Ventures Or irrelevant… Steven Reinemund came from retail food, is a Dean at Wake Forest now Engineering and Technology rates at just 7% of influence overall, with only 3 directors even having it as a background knowledge Only 2 directors have Production and Processing Bigger backgrounds in Building and Construction, Mechanical products, and Economics Recommendations? You COULD vote out on attendance for Kotzubei, or… You could vote on the fact that this is a highly compromised board, controlled by its Executive Chair, with a puppet CEO and stacked with irrelevant SPAC appointees Vote no on Cote, Fradin, and sure, Kotzubei for one less SPAC guy Upcoming: Larry Summers, of women aren’t as smart as men fame, at Skillsoft, AGM in July, but he’s a class II director and it’s a class I year Wilbur Ross, ex Trump Commerce Secretary at Coya Therapeutics, but he’s a class I director in a class III year Keurig Dr. Pepper Our Board met 10 times during 2024. Each current director attended at least 75% of the total number of meetings of the Board and committees on which such director served that were held during 2024 while the director was a member, with the exception of Mr. Michaels due to health reasons.