Non-profit board interlocks are a widespread, plus Kroger’s CEO fired, and Indivior’s overhauled activist board
This is Proxy Countdown. Welcome to the big show for the week of March 3, 2025 alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:
A secretive, but very loud CEO thud at Kroger
Reasonable relocation costs at American Well Corporation
Proxy cage match confusion at Indivior
Shareholders blame a woman for being the only woman at Quanex Building Products
And on the Big Votes, Matt
Top Stories:
The big news is out of Kroger where the big man, Rodney McMullen, the Company’s Chair and CEO, resigned, effective immediately.
The only thing shareholders know is that “On February 21, 2025, the Board of Directors was made aware of certain personal conduct by Mr. McMullen and immediately retained outside independent counsel to conduct an investigation, which was overseen by a special Board committee
And that “Mr. McMullen’s conduct is not related to the Company’s financial performance, operations or reporting, and it did not involve any Kroger associates.”
It’s clearly pretty bad though because they are taking away his unvested equity awards and his 2024 bonus and firing a man who has been at Kroger for over 40 years and held every management job possible: 1) CEO, 2) Chair, 3) COO, 4)Vice Chair, 5) CFO, 6) EVP, Strategy, Planning, and Finance, VP, Planning and Capital Management.
Lead Director Ronald Sargent is the interim CEO and Chair. Which means that even in the interim this board has no sound governance principles.
At Kroger rival Albertsons Companies a more subdued CEO succession took place: a few months after the failed merger between the rivals, CEO Vivek Sankaran announced his retirement and as part of the Company's succession plan, the Board appointed Susan Morris as the next CEO and Chair.
On a sidenote, which scenario is more like the WWE-ification of the corporate world? Is it the longtime CEO who is suddenly fired for misconduct or the planned CEO succession?
Rudolf A. Bless has stepped down as the Chief Accounting Officer at Bank of America.
God bless you, Mr. Bless. That’s it, I just came here for that joke.
Chief Information and Digital Officer Thomas Peck, Jr. is getting a one-time equity award of $1.5M at Sysco Corporation to focus him on the successful implementation of a significant, multi-year technology initiative.
Why exactly does a guy who is already making $4M need another $1.5M to focus on his job? But good luck telling him no, he was a Captain in the United States Marine Corps for nine years
Celebrity director Marissa Mayer joins the board of Hilton Worldwide Holdings. After serving as CEO at Yahoo! for five tumultuous years, Marissa is now the CEO of Sunshine, which has just launched the Shine app, an artificial intelligence photo sharing platform. She is replacing long-tenured director Judith McHale.
Dollar Tree has added three directors to the board named Mike, Bill, and Tim. Considering they already have a Jeff, Dan, Paul, and Ed, it’s no surprise that the man with the lowest influence (6%) on the board of Dollar Tree is a complicated fellow named Bertram.
Let’s end on something reasonable for a change: American Well Corporation has entered into a separation agreement with Vaughn Paunovich (EVP, Enterprise Platforms). As part of this agreement, he will receive reimbursement of up to $3,500 in relocation costs.
PROXY CAGE MATCH
Indivior has further overhauled its board, including reducing its size, following ongoing pressure from activist investor Oaktree Capital Management. Here’s a somewhat brief summary of all of Oaktree’s peer pressure:
Two directors stepping down at the AGM
One director stepping down immediately, after three months of tenure
A new board chair in January
The CFO vacating his board role
And the CEO being replaced by a director Mark Crossley is being replaced by Joe Ciaffoni, who joined the board as a non-executive 3 months ago
Engaged Capital has nominated two directors to the board of sandwich company Portillo’s: former Wingstop CEO Charlie Morrison and Mountain Dew marketer Nicole Portwood. But the real issue on the Portillo’s board might be Ann Bordelon. Why Ann? Because board members are asked to name their favorite menu item in the company’s annual proxy statement and while all others picked some kind of sandwich (an Italian Beef, dipped with Hot Peppers for CEO Michael Osanloo and an Italian Beef with Hot Peppers and Cheddar for board Chair Michael Miles, Jr.) Ann said merely "chocolate cake.”
Finally, Elliott Investment Management has nominated seven directors at Phillips 66. Elliott is pushing for annual director elections and a restructuring of the board to 12 members, meaning its 7 directors would control the board.
VOTE RESULTS TABLE
Here are the highlights from large cap annual meetings over the past week:
First, two of the companies we talked about in last week’s show:
Not much dissent at TransDigm
Lowest: Gary E. McCullough 9% NO
A bit more action at Fair Isaac
Say on Pay 17% NO
Braden R. Kelly 14% NO
(next lowest Joanna Rees 9% NO)
At Jack In The Box, 19% said NO to Say on Pay, but nobody seems to be blaming the Pay Committee:
Michael W. Murphy, Chair 4%
David L. Goebel 5%
Madeleine A. Kleiner 5%
Two Class A directors voted out:
Ernest E. Ferguson
John R. Lowden
While a SHP to increase the amount of Class A directors from 2 to 3 failed (9% YES)
Chair Robert P. Ingle, II: 73% total voting power (23% Class A)
Apathy rules at Essa Pharma where there were more broker non-votes than votes for Say on Pay:
For 6,665,705
Against 2,561,065 (28%)
Abstain 0
Broker Non-Votes 9,646,524
And finally, an absolute classic at Quanex Building Products, where 15% of shares were against Susan Davis (all others at least 93%) because she chairs the nomination committee on board with only one female director! Herself
THE BIG VOTE PICKS
March 10
Sanmina Corporation $4B
March 11
Transcontinental Inc. CAD1B
Toll Brothers $11B
Griffon Corporation $3B
Sonos $2B
Maximus $4B
Adient PLC $1B
March 12
TE Connectivity plc $44B
Analog Devices $114B
Starbucks $129B
Inclusion and Diversity Performance Goals axed
Arrowhead Pharmaceuticals $ 2B
March 13
Agilent Technologies $35B
Cabot Corporation $4B
National Fuel Gas Company $7B
F5 $16B
Kojamo Oyj EUR2B
March 14
Blue Bird Corporation $1B
HEICO Corporation $33B
New data showcase: non profit board connections
Source data: Form series 990 (N, EZ, PF included)
We downloaded all Form 990 filings with filing dates from 2019-2024
Tax dates differ from filing dates - we used taxable dates as they represented boards at the time
We pulled any “name” field from the filings in any XML nest (42m names)
First process: Name matching
We generated over 750,000 name permutations for 220,000 directors in our database( F/L, F/M/L… etc)
We added over 800 common nicknames to the permutations (Elizabeth = Beth = Liz… etc)
We tagged “common names” using all combinations of top 500 first and last names (US births in 110 years)
Scrub, exact and 97% threshold fuzzy matched to 990 names scrubbed
Second process: Confirmation
Focused only where NP title is “trustee”, “director”, or other forms
If match was a common name, deepsearch any bios in our database from the last 5 years for mention of the non-profit
QA and throw out non “directors”, common names without bio matches, non matches
The goal:
Answer “is there a hidden fistbump economy to get on boards? Can we find feeder systems for directorships that have nothing to do with merit? And do investors want directors who know each other or directors who have a track record of performance?”
The results:
36,492 new loops added - increase of 33% from board interlocks alone
25% of all loops now run through a non-profit board
Foundations, city associations, and industry associations are major feeder
The Partnership for New York City contributed 2,566 new pathways to loops
The National Association of Manufacturers contributed 1,486 new pathways
Of the 1,879 company boards where we found board interlocks, 377 of them had a >50% increase in loops when looking at non-profits
IE, Domino’s Pizza had a 89x increase from 2 loops to 180 through Business Leaders for Michigan and the Business Roundtable
95 companies had ZERO loops outside of nonprofits
The hidden fistbump economy likely exists:
When adding non profit boards, the average director in the US went from 4% connections to their boards to 19%
CEOs and Chairs, the jump was from 4-5% to 30-35%
Management consolidates power through non profit connections - who you know
CEO representation rules
I know of one mega cap company where the rule was no one could join a board of any kind except the CEO - definitely not for profit, but no not profits, not even local ones
The result of CEO-only board rules? CEOs have all the connections
This week’s companies:
High School:
TE Connectivity plc $44B
Analog Devices $114B
Local alert: New England Patriots are a throughput for directors here in the past
Bob Kraft, Pats owner, sits on NE Patriots Charitable Foundation and Massachusetts Competitive Partnership with Vincent Roche and Joe Almeida, both on Analog Devices board
Starbucks $129B
The reason why Mellody Hobson is such a power figure - virtually every connection runs through her
On the board of Rockefeller Foundation, American Friends of Bilderberg, Center for Strategic and International Studies, World Business Chicago, Los Angeles Organizing Committee for the Olympics in 2028, the Bloomberg Family Foundation
She’s retired from the board now, but there’s a good reason she sticks around - she knew EVERYONE on the board here and at JPMorgan, where she’s still on the board
HEICO Corporation $33B
Agilent Technologies $35B
The biggest pathway runs through Biotechnology Innovation Organization trustee/directorships
Side note: Non profits are also key pathways for academics - usually few connections to for profit boards outside of the one they’re on, but non profit orgs offer much wider pool
Should an investor be asking why - are these the pliable academics? The easy yes vote?
2025 staggered class - Dr. Otis Brawley and Dr. Mikael Dolsten
Both are YES votes this year, because…Fascinating proposals
Remove supermajority is a board rec FOR
Remove staggered board is a board rec NO REC
100% vote YES on removing supermajority and declassifying the board - and vote your supertenured directors out next year (Heidi Kunz, 26 years; George Scangos, 15 years; Koh Boon Hwee, 23 years)
Middle School:
Toll Brothers $11B
F5 $16B
National Fuel Gas Company $7B
11 person board, no board interlocks inside 2 degrees
39% of board influence between David Bauer (the CEO), Ron Tanski (the retired company attorney and ex- CEO), and Jeff Shaw (CEO of Southwest Gas who began his career at Arthur Andersen) run through the American Gas Association board of directors - and for Tanski, he actually sits on two other public boards with members of the American Gas Association board, so it’s a gas lovefest
On the 11 person board, there are three directors who gladhand at association meetings, but only 2 women
VOTE NO on Tanski and Shaw
Both have 11 years tenure here together
One is ex CEO - one CEO of the company on the board is enough
Open slots for women on the board or more than ONE person of color
Elementary School:
Transcontinental Inc. CAD1B
Griffon Corporation $3B
Sonos $2B
Maximus $4B
8 person board, no board interlocks inside 2 degrees
3 of the 8 person board all sat on the Northern Virginia Technology Council together while on Maximus board
They rep 44% of board influence - one of whom, Bruce Caswell, is the CEO
VOTE NO on Rich Montoni and Anne Altman
Montoni tenured since 2006 - going on 20 years - he used to be CEO, replacing a CEO who was “inappropriate” with a female employee in 2006
Altman is chair of the nom committee
VOTE NO on Raymond Ruddy - no 81 year old director should sit on a board for 21 years and be considered independent, especially when they used to work at the company up until 2001
His TOTAL tenure, since he was an executive 37 years
Institutional knowledge is one thing, embedding yourself like a tick on a board for 37 years and getting the highest base pay with nearly 200,000 deferred shares
Adient PLC $1B
Sanmina Corporation $4B
Cabot Corporation $4B
Only one 2 degree connection on public boards - Christine Yan to Sean Keohane - until you add non profits
American Chemistry Council and the National Association of Manufacturers boards add 4 more connections on the board almost all of which involve CEO Sean Keohane
Kojamo Oyj EUR2B
Blue Bird Corporation $1B
DAMION:
That’s the Proxy Countdown for the week of March 3, 2025. Join us next week when we jump back into the Alternative Democracy pool... forever on the lookout for shareholder shenanigans, dopey directors, and scandalous CEO pay ratios
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