Members of the Wal-Mart Stores Inc. board of directors are asking shareholders to vote against five of nine proposals that appear on this year's proxy statement.
Wal-Mart released its proxy statement Wednesday in advance of its June 5 shareholders meeting at Bud Walton Arena on the University of Arkansas campus. Proposals opposed by the board include requests for an annual report on recouping executive pay, an opportunity for shareholders to nominate board members, a report on greenhouse gas emissions generated through maritime shipping, executive pay based on return-on-investment figures and the election of an independent board chairman.
Proposals related to recoupment of pay and an independent chairman were defeated at the 2014 annual meeting. Both received about 15 percent of the vote at last year's meeting.
More than 50 percent of Wal-Mart's stock is controlled by the Walton family. Rob Walton, son of founder Sam Walton, is board chairman. A recoupment proposal has been on the ballot the past two years.
Board members again asked shareholders to vote against the recoupment proposal because Wal-Mart already has "existing comprehensive recoupment policies and practices" and follows disclosure rules put in place by the Securities and Exchange Commission. Wal-Mart already has, according to the board, "broad rights" to recoup compensation. Those policies go beyond what the shareholder proposal is asking, according to the board.
"Walmart and the Board are committed to pursuing recoupment actions, when appropriate, against current and former Associates believed to have acted unethically," according to the proxy statement. "We already are required by SEC disclosure requirements to disclose in our annual proxy statement when compensation has been recouped, and the amount recouped. ... In addition, recoupment of compensation is not the only sanction that Walmart may impose on Associates who violate Company policies or otherwise act contrary to the best interests of the Company."
Wal-Mart also said it has policies in place that don't require an independent board chairman. Wal-Mart has separated the role of CEO and chairman since 1988, something it says is "unlike many other companies in the Fortune 100."
An incentive compensation plan related to return on investment also is being proposed. The proposal states that Wal-Mart's compensation committee "may overemphasize sales growth even when that growth results in declining rates of return on investment and in some cases does not produce returns that cover the cost of capital."
The proposal cites revenue growth of 9 percent the last five years, while same-store sales growth has declined.
"We estimate that during this period the rate of cannibalization -- percentage of new store sales which cannibalized existing [Wal-Mart U.S.] and Sam's Club sales -- averaged above 51" percent, according to the proposal.
Wal-Mart opposes that proposal because "payouts under out compensation plans have been closely aligned with our operating results." While return on investment is a key measure for setting compensation, that metric changes based on long-term growth plans.
"On occasion, the Company may make strategic investments that may, at times, cause our operating expenses to grow at a faster rate than net sales and that may result in our operating income growing at a slower rate than net sales," the board said in its opposition, citing as an example $1 billion in e-commerce capital expenses. "We believe the adoption of the policy requested by the proposal is unnecessary, duplicative of practices already followed," they added.
Wal-Mart achieved victory over one major shareholder proposal before its annual meeting. The retailer was allowed last week by the 3rd U.S. Circuit Court of Appeals to not include a proposal related to board oversight of certain products, including guns with magazines capable of holding 10 or more rounds.
Business on 04/23/2015