Proxy Season Proposals: the Popular, the Panned & the Common Sense of Tobacco

Source from:  Tobacco World 02/10/2011

Another uncommon shareholder proposal was filed last year by healthcare system Trinity Health, which asked cigarette company Philip Morris International, producer of Chesterfield cigarettes and Virginia cigarettes, to conduct a study about how the company markets its products to poor people. In its proposal, Trinity Health requested that Philip Morris "commission an independent study and issue a report on the affect of our company's marketing on the purchasing practices of poor people and what might be done to mitigate the harm to innocent children. "The company recommended a vote against the proposal, stating, "We believe that the right course for the company is to continue participating in the tobacco industry by marketing and selling its products responsibly, by advocating and supporting strong, effective and reasonable regulation of tobacco products, including the marketing of tobacco products, and by supporting communications about the serious health effects of smoking, including the fact that smoking causes fatal diseases and is addictive." The proposal received about 4% of votes but Trinity Health resubmitted the proposal this year and hopes it fares better. "We're asking Philip Morris to review its policies on respectable business practices," Trinity Health spokesperson Cathy Rowan said. Stay tuned to see if the shareholder proposal receives enough votes in favor to effect a change in company policy. Come to Think of It, That Makes Sense Last year the AFL-CIO filed a proposal at Eli Lilly and Co. to prohibit current or former CEOs of public companies from serving on the compensation committee. In its supporting statement, the AFL-CIO put forth academic evidence that compensation committees whose members consist of current or former CEOs end up creating more generous executive compensation packages than those compensation committees who exclude CEOs as members . The union argued in the proxy that, "We believe that CEOs who benefit from generous pay will view large compensation packages as necessary to retain and motivate other executives. In our view, those who benefit from stock option plans will view them as an efficient form of compensation; those who receive generous 'golden parachutes' will regard them as a key element of a compensation package. Consequently, we are concerned that the inclusion of CEOs on the compensation committee may result in more generous pay packages for senior executives than that necessary to attract and retain talent." Academic studies notwithstanding, Eli Lilly recommended that shareholders vote against the proposal, and the proposal eventually received less than 8% of the vote. Investors are also concerned with sitting directors who stretch themselves too thin. In 2008, investor William Steiner filed a proposal at General Electric Corp. to curb overextended directors, a measure which received 34% votes in favor, with the board recommending a vote against it, according to a GE representative. At that time, there were 15 outside directors serving on the board, and according to GE's 2008 annual report, the board held 22 meetings. Also according to the report, each outside board member visited at least two GE businesses without the involvement of corporate management and the board conducted a self-evaluation. Clearly, GE believed in the quality and integrity of its board, because 14 of the 15 remain board members today. In a time of increased responsibility and time commitment for board members, curbing overextended directors probably sounds like a smart idea to investors, but it's not a clear cut area. For instance, what criteria would be instituted to decide who is or is not overextended. Furthermore, would anyone, even an activist shareholder, want to push this agenda so much that it results in the federal government's involvement in one more aspect of boardroom business? Not likely. Enditem