Company is among the latest to face investor pressure on picking director nominees
Kinder Morgan’s stockholders voted at its May 10 annual meeting to adopt a proxy access bylaw – a move the energy infrastructure company’s board of directors had urged them to vote against.
The proposal, which got 58.2 percent of the votes cast, came from New York City comptroller Scott Stringer on behalf of the city’s five public pension funds, which have a total of more than $170 billion in assets under management. The comptroller has been an active proponent of proxy access at a variety of companies.
Specifically, the proposal called for the adoption of a bylaw that would limit the number of shareholder-nominated candidates appearing in proxy materials to the larger of two or one quarter of the directors then serving. Those making director nominations would, among other things, have to have owned 3 percent or more of Kinder Morgan’s stock for at least three years and would have to give the company certain information about the nomination, as dictated by SEC rules.
‘We believe proxy access will make directors more accountable and enhance shareholder value,’ the proposal states, citing a 2014 study concluding that proxy access could raise overall US market capitalization by up to $140.3 billion if adopted market-wide. The proposal also states that, between January 2015 and October 2016, 95 similar shareholder proposals received majority votes and at least 270 companies of various sizes across industries enacted bylaws with similar terms.
IBM’s stockholders voted by 59.4 percent to 40.6 percent at the company’s recent annual meeting to adopt a similar proxy access bylaw (CorporateSecretary.com, 5/12).
In rejecting the proposal, the Kinder Morgan board writes in the company’s proxy statement that its corporate governance approach provides effective board accountability and responsiveness and that the proxy access bylaw would not be a productive means of giving stockholders greater involvement in the company’s corporate governance.
‘Over the last two years, proxy access has become a popular topic of discussion among companies, investors and governance experts,’ the board states. ‘While a number of companies have adopted some form of proxy access in the last two years, not enough time has passed with these provisions in place to determine the ultimate effect of these policies.’
The board argues that, if implemented, proxy access may not be in the best interests of the company and its shareholders. For example, it says, ‘the right to nominate up to 25 percent of our board each year could result in excessive disruption of the balance of skill, experience and diversity on our board, reduce the effectiveness of our board and potentially have a negative impact on the company’s financial and operational performance.’
The board already has ‘frank and open dialogue’ among its members and with management, the primary goal of which is to advance the long-term interests of stockholders, it argues. ‘Proxy access could create a politicized environment with frequent election contests and cause tension among our directors and between management and our board, which would have a negative impact on our board’s ability to represent the best interests of the company and our stockholders as a whole.’
Meanwhile, other shareholder proposals – all of which the board had opposed – were rejected. A proposal that Kinder Morgan issue a report reviewing its policies, actions and plans to measure, monitor, mitigate, disclose and set quantitative reduction targets for methane emissions resulting from its operations, received 39.8 percent backing.
The New York State Common Retirement Fund, of which state comptroller Thomas DiNapoli is trustee, had urged shareholders to back a proposal that Kinder Morgan issue an annual sustainability report describing the company’s short and long-term responses to ESG-related issues, including issues related to human rights and the rights of indigenous communities. That measure received 37.7 percent support.
Finally, a proposal that the company publish an assessment of the medium and long-term portfolio impacts of technological advances and global climate change policies received 37.5 percent support among shareholders.
A Kinder Morgan spokesperson declined to comment on the results of the shareholder votes.