I will categorically deny that I have ever hired anyone for the simple reason that I did not want take a turn at voting CSC proxies. But…I am up, starting July 2023.

Context. How people are paid means a lot. How Boards are constituted and structured means a lot. “Show me how they are incented and I will show you what lies in the future” is loosely a Munger.

So, we read them. Ourselves. And track how they change year to year. If you read 100 a year, you get a pretty good idea of trends and sneakiness. The reality is that most are “written” by the same 3 consultants and thus are almost too bland to either be excited or mad. Just corporate mediocrity. Which also says something about the company. And then you have 5% that are “wow that is interesting and someone is really paying attention.” We like that. And 10% of the time we see outrageous grift.

We have put people on Boards specifically to go on comp committees as we enjoy management’s eyes lighting up when we show them our blueprint which involves fat option grants staggered a LOT higher than the current stock price. And the crazy idea of tying short term targets to actual corporate goals like a new sales initiative or a working capital reduction.

Not all companies are on a calendar year so I got the pleasure of reading two this month of our holdings. I shall not mention names because we like them and we save public shaming for the truly egregious or duplicitous. But it’s amazing how companies can slip from complete focus on the Northstar. Example: “we are going to ask for an authorization to increase our shares outstanding from 30mm to 200mm so we can consider a stock split.” (They only had 7mm un-issued. We told them we would vote against anything over 50mm.) Why? So you can encourage more message board numb-nuts to day trade your stock?

#2. The company is touting that 80% of their NEO pay is “performance based.” Except that 50% of that is a 3-year RSU that is 100% time weighted, which is the equivalent of getting paid for chair-sitting for 3 years. There is nothing wrong with a time-based RSU – say at 25% of total comp – because management turnover is a real expense and weird, funny things happen on the way to the bank. But it makes the company look sneaky when it doesn’t have to be. A time-based RSU is NOT risk based. Yes, there could be a terrible plane crash before the 3 years so we are not 100% correct. But if you are paying a consultant to support a case that says otherwise, find a decent children’s charity and make us all feel better instead. We vote no.