The Big Vote at Hologic against the legacy of Icahn, plus Norfolk Southern’s gaslight

Written By Matt Moscardi

PROXY COUNTDOWN SCRIPT

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This is Proxy Countdown. Welcome to the big show for the week of February 26, 2024  alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:


  1. A clue that Warren Buffet is finally stepping down at Berkshire?

  2. An Altria director retires and gets promoted on the same day

  3. A Norfolk Southern director becomes a doctor and a safety expert overnight 

  4. Much ado about nothing much at the Apple vote

  5. And on the Big Vote, Hologic, the Victoria’s Secret of medical devices.




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Trade Wire - BUY/SELL

Top Stories:

  1. After less than two years of board service, Jacinto J. Hernandez is stepping down from the board at Altria Group. In connection with his “retirement,” Hernandez will provide strategic advisory services to Altria for a period of five years, and Altria will pay him an annual consulting fee of $300,000.

  2. Atmospheric scientist Dr. Susan K. Avery is stepping down from the board at Exxon Mobil.

  3. Greg Abel is stepping down from the board at The Kraft Heinz Company. Does this mean Warren is finally ready to pass the crown to Greg at Berkshire?

  4. Tapestry has found two random dudes to help it sell products to women: Sysco CEO Kevin Hourican and Bristol Myers Squibb CFO David Elkins.

  5. United Airlines Holdings has appointed Roz Brewer to its board. She was recently CEO at Walgreens and before that was COO at Starbucks.

  6. And in a bit of foreshadowing, let’s end on Carl Icahn:

    1. Just weeks after billionaire activist investor Carl Icahn secured two seats on the board of American Electric Power, he promptlyy fired CEO Julie Sloat whose tenure lasted less than 14 months.

    2. She will be replaced on an interim basis by Benjamin G.S. Fowke III, the former CEO/chair of Xcel Energy Inc.

    3. Fowke, who has served on the AEP Board since February 2022, will receive $1.6M in salary, a short-term bonus targeted at $2.6M and a $6M equity grant just for saying yes to keeping the seat warm. If the seat is still his on August 26th, he will get another $1M.


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PROXY CAGE MATCH

  1. The proxy war at Disney stays hot.

    1. Blackwells wants AI, is relentlessly attacking Nelson Peltz, and is posting a bunch of AI-generated photos and memes.

  2. Moving over to Norfolk Southern vs. Ancora, where Ancora wants to replace the CEO, COO, and basically the entire board.

    1. Norfolk released a preliminary proxy statement this week where it highlighted Safety Improvements by reporting that it has:

    2. “Increased Safety Committee meeting cadence to enhance oversight of key safety initiatives”

    3. But what’s most noteworthy is its updated, self-reported skills matrix. Most notably:

      1. The skill called ‘Environmental & Safety’ in 2023 which comprised “A thorough understanding of safety and environmental issues and transportation industry regulations.”

        1. Bell, Leer, Lockhart, Mongeau, Scanlon, Shaw

      2. Has been replaced by a ”Safety” skill in 2024 that reflects a “Deep understanding of safety process, including in the transportation of industrial space, or Board or executive responsibility for oversight of safety metric compliance.”

        1. Anderson (new), Davdson (new), Heitkamp (new), Jones, Mongeau, Scanlon, Shaw

      3. Most incredibly, new Safety Committee chair Chris Jones DID NOT have a checkmark next to his name for the “Environmental & Safety” skill in 2023 but now suddenly has a check next to his name for “Safety” in 2024

      4. While his bio includes no mention of the word “safety” in 2023 and referred to him as “Mr. Jones,” his bio in 2024 suddenly refers to him as “Dr. Jones” seven times (with no reference to his educational background) and mentions the word “safety” FIFTEEN TIMES. Including 8 times in the first 3 sentences, which is 2.66 “safety”s per sentence.

        1. Safety Committee:  Davidson (new), Jones (chair), Lockhart, Mongeau, Scanlon

          1. Presumably Heitkamp (new) and Anderson (new)

      5. The skills matrix is a gaslight, and Norfolk Southern is Gregory Anton - this is a masterclass in rearranging the chairs on train 32N

 


<VOTE RESULTS BUMPER>


VOTE RESULTS TABLE 


Moving over to our vote results table:

  1. The vote is in at Apple.

    1. Shareholders are happy. All directors received the support of at least 94% of the vote.

      1. Most Art Levinson 6% NO

        1. Matt: Ron Sugar 4% against because you already have Wanda Austin (winner at 99.3%)

      2. Director votes are Say on TSR votes - just because Apple made you money yesterday, we’re now set up for slow burn of failure of investor guardrails tomorrow?

    2. Moving over to Say on Pay, where shareholders were slightly more disgruntled: 8% said NO

    3. And finally, regarding shareholder proposals

      1. The three anti-woke proposals failed miserably:

        1. *EEO Policy Risk Report 1.3% YES

        2. *Report on Ensuring Respect for Civil Liberties 1.8% YES

        3. *Congruency Report on Privacy and Human Rights 1.6% YES

      2. While Arjuna Capital’s proposal asking for a report on Racial and Gender Pay Gaps received the support of 31% of voters and an AFL-CIO proposal asking for a Report on the use of AI received the support of 36% of voters.

        1. When we adjust the vote to eliminate the management-friendly shares of Vanguard, BlackRock, and Warren Buffett, the data shows that 48% supported  the Report on Racial and Gender Pay Gaps while 56% voted to approve a Report on the use of AI

        2. Adjusted: (20.85% or 3,222,989,486: V/BR/BH)

        3. Here’s the hypocrisy - 56% of non Blackrock/Vanguard investors are worried about Apple and AI, yet none of those investors think to replace a board members whose job it could be to monitor AI and make sure it happens responsibly?  The suggestion is actually that investors have NO WAY to evaluate skills and talent, they can only evaluate shareholder proposals?

  2. And lastly, at Raymond James Financial, while all directors were reelected with ease, 17% of the vote said NO on Say on Pay.




<THE BIG VOTE BUMPER>

THE BIG VOTE

Hologic

AGM Date: March 7, 2024


2024 Proxy

2023 Proxy

2023 Voting results

2022 Voting results


General Observations

  1. Ownership

    1. Institutional voting power

      1. Vanguard 12.2%

      2. BlackRock 10.3%

      3. T. Rowe Price 10%

    2. People

      1. CEO/Chair Stepen MacMillan 1.23%

  2. Performance outliers:

    1. Overall: .731

      1. Amy Wendell .446

    2. EBITDA .742

      1. Amy Wendell .468

    3. Carbon .795

      1. Amy Wendell .348

    4. TSR .479

      1. Amy Wendell .312

    5. Controversies .904

      1. Amy Wendell .580

  3. Board stuff

    1. First clean sweep in performance outliers: Amy Wendell

    2. 56% women:42% Influence

    3. Skills: There is a skill wheel that lists: Technology, Human Capital management, Business Development/M&A, Executive Leadership, Global Experience, Healthcare Industry Experience, Operational, Financial Expertise

      1. But no directors are attached to these skills

        1. Instead: “Our Nominating and Corporate Governance Committee has determined that each of our director nominees possesses the appropriate qualifications, skills and experience to effectively oversee our long-term business strategy.”

    4. Connections

      1. CEO Stepehen MacMillan has many connections

        1. spent 11 years at Johnson & Johnson Ludwig N. Hantson

        2. Connected to two executives (Erik Anderson and Brandon Schnittker) through Stryker

        3. Connected to Charles Dockendorff through Boston Scientific

      2. Lead Independent Director Sally Crawford

        1. Peter Wells, the stepson of Sally Crawford, a member of our Board, is employed by the Company as an IT Business Analyst

        2. 17 years tenure

      3. Amy Wendell

        1. Connected to General Counsel John Griffin through Por Cristo board (where she is chair)

        2. Connected to Charles Dockendorff through Covidien/Tyco Healthcare/Kendall Healthcare

        3. Connected to Ludwig N. Hantson and Pay COmmittee chair Scott Garrett  through Baxter

    5. Carl Icahn

      1. Carl Icahn acquired 12.6% of Hologic shares in 2013. As part of an agreement with Icahn, the company added two new independent directors and replaced its CEO

        1. Ex-Stryker ($SYK) CEO Stephen MacMillan

          1. Resigned for “family reasons”

            1. MacMillan’s wife, Amy MacMillan, an adjunct Assistant Professor and Instructor of Marketing at Western Michigan University, also has ties with Stryker. She serves as the director of a catering company that pulled in $458,000 from Stryker in 2010.

            2. "The board hired a lawyer to investigate, and while he turned up no evidence of wrongdoing, Mr. MacMillan had lost the confidence of some directors and was forced to resign, a person familiar with the matter said," according to the Wall Street Journal.

            3. "Ronda E. Stryker, granddaughter of the company’s founder and its biggest individual shareholder, remained upset that the still-married CEO was having an affair with the ex-employee, a person familiar with the matter said.

          2. Left Stryker because of affair with Jennifer Koch, who worked as an attendant on Stryker’s corporate jet fleet

        2. Jonathan Christodoro and Samuel Merksamer added as directors

          1. No longer on board


Matt:

Company stats:


Team stats:

  • Type: aristocratic - 100% influence of educated types

  • Middle of the pack performers (731 overall)

  • CEO monarch

  • Highly connected - 52% of board is connected - all through the CEO

  • Low paper similarities, except a board that likes CEOs and pays them more than average


Board CYA needs:

  • Avoid recalls, avoid investigations, avoid product failure

  • Innovate - new products are long cycle

  • Absolutely, 100%, need to represent and have credibility in women’s health and among women, particularly MDs and hospital administration


Future bet thesis:

  • How Carl Icahn destroys a company

    • In 2012, current Hologic CEO Stephen Macmillan is forced out of the CEO role at Stryker, another med device firm, thanks to a relationship with a subordinate who started as a flight attendant on a corporate jet

    • Macmillan joins a startup that does bug spray which is shut down by the EPA just after he leaves for Hologic on the back of Carl Icahn

    • Carl Icahn takes a stake in Hologic in November 2013

      • Installs board/CEO/executive team by December 2013 - two directors and Stephen Macmillan

      • SELL SELL SELL - in the first full year post Icahn installing new executives, the largest growth in line items was sales/marketing (9% increase) and by the exit revenue was up 8.4%

      • Begins exit by Dec 2015, fully exited by March 2016

      • Macmillan is a big winner too - his last three years at Stryker his reported income was around $19.1m - in his Icahn years at Hologic his reported income was $46.6m, more than double

      • By year 3, virtually the entire executive team had been replaced - in 2012, Hologic’s NEOs were a PhD, a PhD, an electrical engineer, and electrical engineer, and an MBA… by 2016, it was a PhD and FIVE marketing/MBA/lawyers

      • SINCE Icahn’s exit, the market-at-all-costs team has returned 79% TSR vs. SP 148%

    • Today, this is still a marketing at all cost company - with zero innovation - there are more major college football players (3) and people with marketing backgrounds (X) than PhDs (1, and it’s one of the three women)

      • The most egregious is Erik Anderson, who played for four years at Iowa State football while “getting” a marketing degree, starts at Hologic in 2014 as a regional salesman, and now IS DIVISION PRESIDENT FOR BREAST AND SKELETAL HEALTH?  

      • Division president of surgical solutions played football at Ohio State and worked at Stryker in marketing

      • The last division president named is Jennifer Schneiders, who has a PhD in biochemistry and got the job by acquisition rather than promotion

    • Macmillan’s latest marketing strategy includes launching a Women’s Health Index, looping video of a black woman on the beach, and sponsoring the Women’s Tennis Association

    • Meanwhile, the FDA is investigating BioZorb, the breast implantable device meant to mark areas for tissue removal permanently, due to complications and complaints of increased infections and pain

    • This board and management team approved the purchase of Cynosure, focused on “vaginal rejuvenation” and female aesthetics for 1.65bn in 2017

    • The company divested Cynosure two years later in 2019 for 205m

      • In 2018, as Cynosure fails and is cited by FDA as a risk, MacMillan pays himself $42m - the most in any single year

      • The pay committee that year was Crawford, Garrett, Hantson and Nawana


Proposal 1: Election of 11 Directors

Annual Elections for ALL directors? YES

Director Slate

  1. Sally W. Crawford 70/2007/f cN 19%

    1. Lead Director since 2017; ​​​Former COO Healthsource, Inc.

      1. became a member of our Board when we merged with Cytyc Corporation in October 2007, having previously served as a director of Cytyc since January 1998.

    2. Other Current Public Company Boards: ZimVie Inc.

      1. Former Public Company Boards: Abcam PLC; Exact Sciences Corporation; Insulet Corporation; Universal American Corporation; Zalicus Inc. (now EPIRUS Biopharmaceuticals, Inc.)

    3. Peter Wells, the stepson of Sally Crawford, a member of our Board, is employed by the Company as an IT Business Analyst

    4. Votes Against Last AGM: 11%​

  2. Charles J. Dockendorff 69/2017/m A 9%

    1. ​​​Former CFO Covidien plc

      1. General Counsel John Griffin from Covidien

      2. Covidien/Tyco healthcare/Kendall Healthcare with Wendell

    2. Other Current Public Company Boards: Boston Scientific Corporation; Haemonetics Corporation; Keysight Technologies, Inc

      1. Former Public Company Boards: n/a

    3. Votes Against Last AGM: 3%

  3. Scott T. Garrett 73/2013/m Cn 8%

    1. ​​​Former CEO/Chair Beckman Coulter; CEO of Baxter’s global laboratory business, Baxter Diagnostics

    2. Other Current Public Company Boards: HCW Biologics, Inc.

      1. Former Public Company Boards: n/a

    3. Votes Against Last AGM: 6% ​

  4. Ludwig N. Hantson 61/2018/m cn 7%

    1. ​​​Former CEO Alexion Pharmaceuticals; former President Baxter BioScience

    2. Other Current Public Company Boards: n/a

      1. Former Public Company Boards: Alexion Pharmaceuticals, Inc.; Baxalta Incorporated

    3. spent 13 years with Johnson & Johnson

    4. Votes Against Last AGM: 4%

  5. Stephen MacMillan 60/2013/m 36%

    1. ​​​CEO/Chair

    2. Other Current Public Company Boards: Illumina, Inc. (TSR and Primary Peer Group)

      1. Former Public Company Boards: Alere, Inc.; Boston Scientific Corporation  (TSR and Primary Peer Group); Stryker Corporation (TSR Peer group); Texas Instruments Incorporated

    3. spent 11 years with Johnson & Johnson; COO Essex Mitchell and Division President, Breast and Skeletal Health Solutions Erik Anderson and Division President, GYN Surgical Solutions Brandon Schnittker also worked at Stryker

    4. Votes Against Last AGM:10% ​

  6. Nanaz Mohtashami 46/2023/f cn 7%

    1. ​​​Managing Director at Russell Reynolds Associates, a leading executive search and leadership advisory firm

    2. Other Current Public Company Boards: n/a 

      1. Former Public Company Boards:  n/a

    3. Votes Against Last AGM: n/a ​

  7. Namal Nawana

  8. ​Christiana Stamoulis 53/2011/f a 4%

    1. ​​​CFO Incyte Corporation

    2. Other Current Public Company Boards: n/a

      1. Former Public Company Boards: n/a

    3. Votes Against Last AGM: 2% ​

  9. Stacey D. Stewart 59/2023/f a 5%

    1. ​​CEO Mothers Against Drunk Driving

    2. Other Current Public Company Boards: PennyMac Mortgage Investment Trust

      1. Former Public Company Boards: n/a

    3. Votes Against Last AGM: less than 1%

  10. Amy M. Wendell 63/2016/f a 8%

    1. ​​former Senior Advisor for Perella Weinberg Partner’s Healthcare Investment Banking Practice; former SVP Covidien

      1. Covidien/Tyco Healthcare/Kendall Healthcare with Dockendorff

    2. Other Current Public Company Boards: AxoGen, Inc.; Baxter International Inc. (primary and TSR Peer Group)

      1. Former Public Company Boards: Ekso Bionics

      2. Chair of Por Cristo board with General Counsel John Griffin

        1. Richar Meelia also from Covidien, also on Por Cristo

    3. Votes Against Last AGM: less than 1%


MATT:

Board recommendations:

SELL SELL SELL!  This board is a 100% target for an activist to unwind the Icahn-ing of it and refocus on the science of women’s health - the board has virtual zero members with any history of it:

  • MacMillan - Econ, MBA, ops/sales

  • Crawford - marketing/comms, consulting

  • Dockendorff - accounting, finance, CFO

  • Garrett - mechanical engineer, MBA, now a consultant

  • Hantson - gym teacher, PhD in physical therapy, marketing

  • Mohtashami (new) - literature, MBA, strategy consultant, executive search

  • Stamoulis - MBA, applied econ, architecture, investment banking, CFO

  • Stewart - econ, MBA, non profit, finance

  • Wendell - biomedical engineering, mechanical engineering


De-Icahn, remove connected directors 

  • 85% of board influence is NOT engineering/science/medical

  • ZERO doctors on the board

  • Wendell, the only female with engineering experience on the board, is connected directly to the two most powerful men on the board through other roles in which she was a DIRECT SUBORDINATE

  • 52% of the board is connected just through other boards historically


Full activist approach vs. phased approach:

  • Full activist - vote out everyone except Mohtashami (new) and Stewart

  • Phased out:

    • Year 1: Vote out Crawford, Stamoulis (longest tenured two directors)

    • Year 2: Vote out Wendell, Garrett (next longest)

    • Year 3: Vote out Dockendorff, Hantson

  • Replacement skills needed:

    • WOMEN’S HEALTH - an MD or a PhD, at least 2 directors

    • Engineering, device R&D - not sales/exec, you need device innovation, R&D

    • Government / military - there are tremendous potential military contracts / vet hospital uses



Proposal 2: Auditor

  1. Ernst & Young: 93% YES 2023

Proposal 3: Say on Pay

  1. 23% NO in 2023

    1. implement a payout cap at 100% for negative TSR performance that otherwise warrants above-target funding

    2. 30% NO in 2022

      1. Changed long-term equity performance plans from 1- to 3- years

    3. 21% NO in 2021

  2. Comp Committee Chair Scott Garrett

  3. CEO perks include:

    1. reimbursement and payment of expenses related to the Company’s annual salesforce reward trip of $120,924

    2. tax reimbursements of $39,612 related to the Company’s annual salesforce reward trip

    3. $51,558 attributable to the personal use of private aircraft

  4. Arbitrary NEO raises every year

    1. 4%-8.3% increase in base salaries (4% for CEO)

    2. 3%-33% increase in LT award grants (10% for CEO: from $10M to $11M)

  5. Easy short-term cash bonus targets

    1. 300% maximum for CEO

      1. Adjusted Revenue: $4.5B (despite hitting $4.91B in 2022)

      2. Adjusted EPS: $4.60 (Despite hitting $6.05 in 2022)

  6. Goofy performance goals and outcomes

    1. Goal: Accelerating global growth, including top- and bottom-line growth in core businesses

      1. Outcome: Leveraged strength of business to focus on our role to globally help more women and elevate the profile of the Company

    2. Goal: Fueling performance through talent-focused leadership, including focusing on succession planning and talent development by continuing to develop potential successors for key leadership positions.

      1. Outcome: “building an inclusive ethos which values diversity across the organization” and “continued focus on developing diverse and performance-driven leaders”

      2. Reality: 3 of 12 management are women

        1. One is Monica Agguire, Chief of Staff

          1. Also known as “chief executive assistant”

        2. According to Zippia: 38% of total employees are women


Matt:

Rec: Vote NO - and the NO vote isn’t for 2023 pay, it’s a NO vote for accrued pay beyond Icahn’s holding period - MacMillan has assembled one of the worst executive teams by skills and needs, he made a horrible acquisition and tried to pivot from women’s medical science to women’s aesthetic snake oil, and he’s covered the inability to generate internal growth by sponsoring women’s tennis and launching a fake women’s health index.  There are 7 years of pay to rectify.


DAMION:

That’s the Proxy Countdown for the week of February 26, 2024. Join us next week when we jump back into the Alternative Democracy pool... forever on the lookout for shareholder sharks, floating bandaids, and wayward directors.






<OUTRO THEME>

Matt Moscardi
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