The Big Vote at Qualcomm, plus Zuckerberg’s new board toys, and the social media proxy wars at Disney

PROXY COUNTDOWN SCRIPT

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This is Proxy Countdown. Welcome to the big show for the week of February 19, 2024  alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:

1. Two new playthings for Mark Zuckerberg on the Meta board;

2. The southeast Asian CEO revolution continues at PTC;

3. The ongoing meme-proxy battle at Disney;

4. Finally some shareholder anger at Norfolk Southern;

5. And on the big vote, a deep dive at Qualcomm, that company that you sorta know who they are and kinda know what they sell

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Trade Wire - BUY/SELL

Top Stories:

1. Mark Zuckerberg has added two new directors to the board at Meta Platforms: John Arnold and Hock Tan. Both will serve on the Audit & Risk Oversight Committee

1. Hock Tan is the longtime CEO at semiconductor company Broadcom. Hock is accustomed to serving with dictators as the Broadcom board is controlled by the 69% influence of its chair and co-founder Henry Samueli

2. John Arnold is a hedge fund guy, having become the youngest billionaire in the US in 2007 at the age of 33. Before starting his first hedge fund he was known as the “king of natural gas” for his prolific work at Enron where he specialized in trading of natural gas derivatives. He received the largest bonus in Enron history, $8 million dollars, just prior to Enron’s infamous collapse. His current foundation, Arnold Ventures LLC, has come under heavy scrutiny recently for issuing a grant to the Baltimore Police Department to trial aerial surveillance hardware and for creating a dystopian Public Safety Assessment which gave recently arrested individuals a score to determine their flight risk and potential bail

3. In the end, Meta can proudly announce that a former successful day trader at Enron who heavily profited as the company was collapsing is sitting on its Audit & Risk Oversight Committee.

2. The southeast Asian CEO revolution continues: this time at PTC, where Neil Barua succeeds James Heppelmann as the new CEO at the computer software and services company headquartered in Boston. Hepplemann is not sticking around on the board as Chair and is taking his 34% of boardroom influence with him.

3. And lastly, two large cap companies announced CEO transitions:

1. Padraig McDonnell will succeed Michael McMullen as CEO of Agilent Technologies in May

2. And Robert Michael will succeed Richard Gonzalez at AbbVie in July.

3. From a Mc to a Mc and from a Rob to a Rick, this is the nature of Fortune 500 companies in America.

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PROXY CAGE MATCH

1. The barrage of proxy contest filings keeps coming at Disney. Of note:

1. Blackwells has filed headshots of its three nominees, featuring a scowling Craig Hatkoff. The filing says this of Craig: “You couldn’t sketch a better Disney leader in a writers’ room.”

2. They also took a shot at Nelson Peltz by saying that “Begging for board seats is not a strategy” with a strange picture of an old man on one knee praying to a mouse in a pinstriped suit

3. The hashtags for Blackwells campaign are #thefutureofdisney and #disneydeservesthebest

4. Trian has filed a large photo of disgruntled nominee Jay Rasulo. The former CFO is quoted as saying that “Something's broken in the creation of creative content” and that “I think from the very start back in the 30s, when Walt created the first feature animated film, it started the Disney flywheel. In fact, Walt invented the Disney flywheel that you could take something that pleased people in a movie theater, make it into consumer products, ultimately put it into Disneyland as rides and attractions. Animation is so key to the Walt Disney Company. So key to the success and the running of the flywheel that to imagine that The Walt Disney Company has lost its iconic status in animation today is almost unbelievable. And personally, it really affects me because this is how we created success when I was at the company.” 

5. Trian is also asking voters to vote out Disney directors Maria Elena Lagomasino and Michael B.G. Froman.   

6. Matt: Rasulo got his BA in econ and his MA in Econ and worked at Chase, then in finance at Marriott - and he knows a lot about the creative process??  The Trian posts are a mix of comic genius and petty billionaire

2. According to several reports it has been a banner week for billionaire investor Carl Icahn. Carl not only managed to procure two board seats at JetBlue and two board seats at American Electric Power but he also celebrated his 88th birthday

3. Arkhouse Management has launched a proxy fight at department store Macy’s, nominating nine directors to the company’s board. Macy’s had previously rejected an unsolicited bid from Arkhouse to take the retailer private for $21 per share.

4. And lastly, a group of investors led by Ancora Holdings said it had proposed replacing  Norfolk Southern’s top management, including its CEO and COO, and nominated eight directors to the railroad operator's board. The investor group, which holds a "large equity stake" in the company, aims to replace CEO Alan Shaw with former UPS COO Jim Barber and COO Paul Duncan with Jamie Boychuk. Boychuck previously departed rail company CSX “for reasons unexplained” after serving as Executive Vice President Operations after just six years and has been “retired/self-emplyed” since August 2023

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VOTE RESULTS TABLE 

Moving over to our vote results table:

1. All directors received between 11 and 18% votes against their reelection at Central Garden & Pet Company. High under normal circumstances, 82% of voting power at the company is held by company founder William Brown and institutional voters, meaning that basically every other shareholder voted to remove the board.

2. At Ingles Markets, both Class A directors were rejected. That’s Ernest Ferguson and John Lowden. Class B directors were reelected because Class B voting power is dominated by company founder Robert Ingles

3. At large cap companies:

1. PTC was notable because while most resolutions passed with ease, it was the vote to confirm auditor PricewaterhouseCoopers that received the most pushback: just over 10% of votes said NO to PwC

2. And finally at Fair Isaac, Say on Pay nearly fails as 42% of voters said NO. BlackRock , Vanguard and Insiders control 25% of the vote.

1. CEO William Lansing received a “special performance-based retention and leadership continuity award” valued at nearly $37 million. This was on top of normal equity valued at another $28 million. Not to mention a $25,259 spousal travel perk, which I just mentioned.

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THE BIG VOTE

Qualcomm

AGM Date: March 5, 2024

2024 Proxy

2023 Proxy

2023 Voting results

2022 Voting results

General Observations

1. Ownership

1. Institutional voting power

1. Vanguard 10%

2. BlackRock 8%

2. Performance outliers:

1. Overall: .462

1. none

2. EBITDA .646

1. Mark D. McLaughlin .325

3. Carbon .590

1. Mark Fields .365

4. TSR .466

1. Cristiano R. Amon .302

5. Controversies .238

1. Mark D. McLaughlin .597

2. Jeffrey William Henderson .573

3. Board stuff

1. One mystery LGBTQ+

2. Skills:

1. Information Security: Experience in cybersecurity, information technology security and/or data security

1. Only 4 directors: Johnson, McLaughlin, Miller, Tricoire

2. Only other category with so few directors (3): Climate/Environmental

3. Top 4 NEOs combined 100+ Qualcomm experience

Matt:

Company stats:

• Major competitors - Intel, Nvidia (adjacent), Broadcom

• Almost all mobile/IoT chips

• Fabless - little to no water

• Stock: 

• YTD: 6.3% (v 4.3% SP)

• 1Y: 20.4% (v 22%)

• 2Y: -9.3% (v 14.4%)

• 5Y: 186% (v 78%)

• Analysts: Overvalued

• 21.7 PE is overvalued!

• Future outlook is boring, too focused on phones

Board stats:

• Aristocratic board - 92% influence of CEOs

• Middle of the pack performers (462 overall)

• Dispersed influence

• Highly connected - 50% of board is connected

• Politically similar, broader board community in common, no industry/education consolidation

Board CYA needs:

• Supply chain labor

• Resource demands (tantalum - US/China, tin - DRC, Australia, Congo, tungsten - Rwanda, Russia, and gold)

• Buyer markets (China)

• Future positioning (low PE, no growth)

Future bet thesis:

• Is this a commodity company (mobile chips that get faster and more efficient, but margins are low) or “baby AI” manufacturer (AI locally powered on phones, cars, devices - the “mobile AI” revolution)?

• Why isn’t this board pivoted from pure client focus, friends in the room, to growth in a booming chip market?

Proposal 1: Election of 11 Directors

Annual Elections for ALL directors? YES

Director Slate

1. Sylvia Acevedo 66/2020/f n 9%

1. ​​Former CEO, Girl Scouts

2. Other Public Company Directorships: Credo Technology Group Holding Ltd (since December 2021)

3. Votes Against Last AGM: 2%

2. Cristiano Amon 53/2021/m 17%

1. ​CEO; at Qualcomm since 1995

1. Brazilian

2. Other Public Company Directorships: Adobe Inc. (since October 2023)

3. Votes Against Last AGM: less than 1%

3. Mark Fields 56/2019/m a 8%

1. ​Former CEO, Ford

2. Other Public Company Directorships: Hertz Global Holdings, Inc. (since June 2021)

3. Votes Against Last AGM: less than 1%

4. Jeffrey W. Henderson 59/2016/m A 10%

1. Former CFO, Cardinal Health

2. Other Public Company Directorships: Becton, Dickinson and Company (since August 2018); Halozyme Therapeutics, Inc. (since August 2015); FibroGen, Inc. (since August 2015)

3. Votes Against Last AGM: 8%

1. Most NO votes by over 32M

5. Gregory N. Johnson 55/2020/m c 4%

1. ​​​Former CEO, McAfee (for 16 months)

1. Military (United States Air Force)

2. Other Public Company Directorships: none

3. Votes Against Last AGM: 1%

6. Ann M. Livermore 65/2016/f N 12%

1. ​Former EVP, Hewlett-Packard

2. Other Public Company Directorships: Samsara Inc. (since June 2021); Hewlett Packard Enterprise Co. (since November 2015)

1. UPS (1997-2023)

3. Votes Against Last AGM: 2%

7. Mark McLaughlin 58/2015/m 8%

1. Chair; former CEO/Chair Palo Alto Networks

1. Military (U.S. Military Academy at West Point)

2. Other Public Company Directorships: Snowflake Inc. (since April 2023)

3. Votes Against Last AGM: less than 1%

8. Jamie S. Miller 55/2020/f a 3%

1. CFO PayPal; former CFO at EY, Cargill, GE

2. Other Public Company Directorships: none

1. Baker Hughes, a GE company (2017-2019)

3. Votes Against Last AGM: less than 1%

9. Irene B. Rosenfeld 70/2018/f C 11%

1. Former CEO/Chair Mondelez

2. Other Public Company Directorships: none

3. Votes Against Last AGM: 2%

10. Kornelis (Neil) Smit 65/2018/m c 1%

1. ​Former Vice Chair, Comcast

1. Military (Navy SEAL)

2. Other Public Company Directorships: none

3. Votes Against Last AGM: 1%

11. Jean-Pascal Tricoire 60/2020/m n 9%

1. ​Chair/former CEO, Schneider Electric

1. French

2. Other Public Company Directorships: Schneider Electric SE (since April 2013)

3. Votes Against Last AGM: 2%

12. Anthony J. Vinciquerra 69/2015/m a 8%

1. Chair/CEO,  Sony Pictures Entertainment

2. Other Public Company Directorships: Madison Square Garden Sports Corp. (since April 2020)

3. Votes Against Last AGM: 3%

Matt: 

Needs assessment: 

• GROWTH

• What’s the the demand needs due to AI

• Large scale manufacturing

• FUTURE TECH

• Lab - next gen, new tech academic

• RESOURCE MONITORING

• Physical constraints - natural resource inputs

Board tendencies:

• CONSERVATIVE: thinks smaller, takes less debt, less dividends, average pay, relies on highly connected board members part of tech old guard (IBM, HP, not new thinkers), constructed to service clients (not technology), almost all CEOs

• MIDDLE PERFORMERS: No superstars, no rookies, all ex or current CEO control - top performer (Jean Pascal Tricoire) doesn’t even bat 600 overall

• NO RECOGNITION: Underperforms uniformly on TSR, all the credit going to bigger players, considered more cell phone chips, bluetooth chips, cute mobile ancillaries, not an AI hitter (PE at 21 vs. Nvidia’s 56), despite being deep in wearables, heavy in Asia and EU cars/phones/devices

Team:

Mark McLaughlin - Palo Alto Networks (cybersecurity) Vice Chair, ex CEO, ex VeriSign… but also came from sales and consulting, went to military academy and got his JD.  All his time in BizDev at security firms, no clear background in actual engineering or chips - TEPID NO - GET A VC, GROWTH ORIENTED PERSON

Sylvia Acevedo - Hispanic women to the rescue, worked at NASA Jet Propulsion Lab flying missions to the sun, Jupiter, Io, Europa, BS and MA in engineering - YES

Cristiano Amon - CEO, Qualcomm lifer, BS in electrical engineering, technical dude.  Adobe board - YES

Mark Fields - Hertz, Ford, QCT sells into cars to run software through chips, but this guy got his bachelors in Econ and an MBA, and has a background in marketing and sales - he knows shit about chips - HARD NO - GET ACADEMIC

Jeff Henderson - Eli Lily, Cardinal Health (every MFer at Cardinal Health), GM at one point, director at Becton Dickinson (check notes), BS in electrical engineering, MBA from HBS - medical device dude - YES

Greg Johnson - McAfee ex CEO, Intuit, background in marketing (Advance Auto Parts, Best Buy, Gillette, Kodak, SC Johnson, Motorola, Kraft Foods), USAF graduate - the overlap here seems tenuous, feels token black guy ish - NO - GET ACADEMIC

Ann Livermore - Deep HP background (including directorship, longest tenured executive at the company), one of the most connected directors (Samsara board with Sue Wagner, Marc Andreessen, Sue Bostrom), background in econ with MBA from Stanford - she’s old school HP lifer with deep ties to SV - NO? - GET MODERN TECH PERSON

Jamie Miller - Paypal, CFO of EY - she’s the finance/auditor (only committee), Cargill, GE, BS in accounting - she’s glass ceiling-ed, always a bridesmaid (CFO) - TEPID YES

Irene Rosenfeld - Mondelez (snack food), General Foods, Kraft Foods (connect to Greg Johnson), BA in Psychology, MS in Business, PhD in Marketing (what the hell is a PhD in marketing?) - HARD NO - GET A VC/GROWTH ORIENTED PERSON

Comp:

• Nvidia: 

• 6/14 are VC, 2/14 are deep academic/lab/engineer, 2/14 are marketing, 2/14 are tech, 1 lawyer, 1 health care device - that’s a GROWTH BOARD

• Intel

• 2 VC, 2 academic/lab, 2 tech, 3 med device/health, blackrock, aeronautic

• Broadcom

• 2 Media, med tech, 2 tech, 2 vc/activist 

Proposal 2: Auditor

1. PricewaterhouseCoopers: 95% YES 2023

Proposal 3: Say on Pay

1. 6% NO in 2023

2. CEO Cristiano Amon only NEO with raise in base salary: up 17% from $1.15M to $1.35M

3. Finally a company where below 25th percentile relative TSR results in “no shares earned”

4. Value of long-term equity is high: a mix of below target and above target performance still resulted in total value = $21M

1. Of course Pay Chair is former Mondelez CEO Irene Rosenfeld

5. CEO Pay Ratio 223:1

1. Sad that that feels relatively normal

6. I’m all for charitable contributions but why exactly are shareholders responsible for matching director gifts? Why is this a even a thing? In total for board last year: about $300k

Matt:

Not the ONLY dude - the CFO also added COO to his title, he got 3m in stock options and 150k extra to his base

Why the former CEO of a snack food and beverage company is leading pay at a chip maker for wireless and future AI devices is beyond me.

Say on Director Pay should exist here though - this is a hugely overpaid board, with an average of nearly 400k per year per director, all for the pleasure of getting Hertz Rent-a-Car and HP printer advice?  This is bananas pay for a board that is far outclassed by competitors.  Mark McLaughlin, with 8 years of tenure, made 540k two years in a row for what? His advice as the Vice Chair of a cybersecurity firm that has a TSR at an all time low?  

Proposal 4: Say on Pay (LTIP)

1. 11% NO in 2023

LTIP vs. Say on Pay - do we break pay out anywhere else for SoP?  I feel like I’ve never seen this…

Proposal 5: Management

1. Exculpation of officers

1. A director or officer of the corporation shall, to the full extent not prohibited by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, not be liable to the corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a director or officer (as applicable).

2. Basically asking shareholders to vote against their best interests

Matt:

NO.  Always no.  Why would any shareholder voluntarily make it easier for a director and harder for themselves to get restitution for negligence?  Since 2022, these proposals are on the rise and it FURTHER limits the potential risk of being a director, which currently comes with D&O insurance that indemnifies them against basically everything AND a 0.2% chance investors care enough to vote them out AND aggregate 7-14 years of tenure with aggregate millions in compensation for 12 meetings a year - and now we exculpate them a bit more??  NO.

Proposal 6: Management

1. Bylaw amendment to require claims under the Securities Act to be brought in federal court

1. Federal Forum Provisions (FFPs) direct all Securities Act litigation filed in state court to federal court. Delaware’s Supreme Court has ruled that FFPs are facially valid

2. Basically asking shareholders to vote against their best interests

Matt:

Again, NO.  When you have exculpation AND a bylaw amendment to push to a easier federal court outside of Delaware (imagine if Tesla had federal court instead of Delaware for the $56bn clawback?), you have to ask what the board is hiding exactly - is there a lawsuit coming?  Do they know something we don’t?  Qualcomm is an otherwise ho-hum company trying to run with the big dogs, why do they need less liability for directors (which are clearly outclassed by other boards at the big dogs) and easier court jurisdictions?  NO.

DAMION:

That’s the Proxy Countdown for the week of February 19, 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.

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