2013 Proxy Proposal 4 - Reduction of Voting Power of Class A Shares

[SignificantOwner]

What are the arguments for/against changing the voting power of our common shares to mirror most other public companies? The proposal can be viewed at the link below.

UNITED PARCEL SERVICE INC - UPS Proxy Statement (definitive) (DEF 14A) Proposal 4-Equal Shareholder Voting

 

[pretzel_man]

What are the arguments for/against changing the voting power of our common shares to mirror most other public companies? The proposal can be viewed at the link below.

UNITED PARCEL SERVICE INC - UPS Proxy Statement (definitive) (DEF 14A) Proposal 4-Equal Shareholder Voting

When UPS went public, A shares were given voting power of ten times that of B shares. Since A shares generally are only given to or purchased by UPS employees, this kept control of the company in the hands of company employees.

Last I looked, less than 40% of the outstanding shares are A shares. Even though the majority of the shares are B shares their votes remain in the minority.

Imagine a room with 100 people in it. 60 vote one way and 40 vote the other. Rather than the vote being 60 / 40, the minority side says we get 10 votes each. So the vote ends up 60 to 400.

As I recall, this was to keep a hostile takeover from happening....

Pros and cons? I guess that if the rules changed we would be accountable even more to shareowners than today.... Is this bad? I don't know.

 

[BrownTie]

Yes and No. It will attract more B share investors which may help raise stock price even more, or less UPS employees from buying more.

 

[2BOver]

I think all UPS Shareowners should vote against this.........first time I have agreed with something on the proxy in a while!

 

[SignificantOwner]

I think all UPS Shareowners should vote against this.........first time I have agreed with something on the proxy in a while!

By vote against do you mean that you want to maintain the current dual class share structure?

 

[Dragon]

The way I see it...do we really need more outsiders telling us what to do..

 

[BrownTie]

I feel like that everyday, like someone looking over my shoulder making sure I hit SPC, Telematics Reviews, Cars I can Run, etc.

 

[Benben]

Oh look, venture capitalists looking to gain control of yet another company and run it into the ground because they intend to install some idiot in-charge who has no clue how the company runs. Tell me, how has that worked out for Kmart/Sears or JCP? Voting a big fat no on this one!

 

[SignificantOwner]

Oh look, venture capitalists looking to gain control of yet another company and run it into the ground because they intend to install some idiot in-charge who has no clue how the company runs. Tell me, how has that worked out for Kmart/Sears or JCP? Voting a big fat no on this one!

N/A. Kmart was in bankruptcy and Sears was already on a downward trajectory after spinning off the profitable entities. Both companies were already in trouble when Lampert stepped in.

 

[anotherupser]

Voted my shares today, very much against the reduction in voting power for employees.

 

[SignificantOwner]

I voted for reducing the voting power of A shares to one vote because...

1 - work conditions will be the same either way.
2 - studies have shown that dual class share structure reduces demand and impacts share price.
3 - more accountability for upper management is a good thing.

I have to think like a shareowner and I believe reducing the voting power of A shares will unlock some value.

 

[tarbar66]

I voted mine yesterday!

 

[Dracula]

I voted for reducing the voting power of A shares to one vote because...

1 - work conditions will be the same either way.
2 - studies have shown that dual class share structure reduces demand and impacts share price.
3 - more accountability for upper management is a good thing.

I have to think like a shareowner and I believe reducing the voting power of A shares will unlock some value.

There is a big difference between being a shareholder and employee/shareholder. All a shareholder is concerned with is share price. An employee/shareholder cares about share price, but just as important is the long-term health of the company. And share price can be manipulated in the short term and the expense of the long term. A shareholder can leave anytime he/she wants. A shareholder/employee doesn't realistically have that option--outside of retirement--and thus, places long term growth ahead of quarterly growth.

If you own a house with walls of gold, and you have some partners who have an outside stake in the house, they want you to start knocking walls down and selling gold. They don't live there, so what do they care? They want the cash NOW. You? You're not so sure you want to mess with the foundation. You'd rather just chip away here and there to build more walls, adding more and more value to your house. If you cash out some walls, you'll have more immediate cash, but at the expense of the overall size of your house.

Crude analogy, yes, but it still shows why A shares should have much, MUCH stronger voting rights than B shares.

If all shares are equal, you can bet work conditions will NOT be the same way in the future. And I would like to see the studies you are referring to showing the reduced demand and lower share price. Please provide a link.

 

[SignificantOwner]

There is a big difference between being a shareholder and employee/shareholder. All a shareholder is concerned with is share price. An employee/shareholder cares about share price, but just as important is the long-term health of the company. And share price can be manipulated in the short term and the expense of the long term. A shareholder can leave anytime he/she wants. A shareholder/employee doesn't realistically have that option--outside of retirement--and thus, places long term growth ahead of quarterly growth.

If you own a house with walls of gold, and you have some partners who have an outside stake in the house, they want you to start knocking walls down and selling gold. They don't live there, so what do they care? They want the cash NOW. You? You're not so sure you want to mess with the foundation. You'd rather just chip away here and there to build more walls, adding more and more value to your house. If you cash out some walls, you'll have more immediate cash, but at the expense of the overall size of your house.

Crude analogy, yes, but it still shows why A shares should have much, MUCH stronger voting rights than B shares.

If all shares are equal, you can bet work conditions will NOT be the same way in the future. And I would like to see the studies you are referring to showing the reduced demand and lower share price. Please provide a link.

6% of public companies have a dual class structure. Have we been better than the other 94% since the IPO? Here's a link from Forbes:

Facebook Ownership Structure Should Scare Investors More Than Botched IPO - Forbes

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[p228]

6% of public companies have a dual class structure. Have we been better than the other 94% since the IPO? Here's a link from Forbes:

Facebook Ownership Structure Should Scare Investors More Than Botched IPO - Forbes

​

From your link:

"There’s little evidence (at least that I can find) that these kind of companies underperform peers in the market, or even trade at a discount to single-share peers."

 

[SignificantOwner]

From your link:

"There’s little evidence (at least that I can find) that these kind of companies underperform peers in the market, or even trade at a discount to single-share peers."

You left of the sentence following the one you quoted. Here's the rest of the quote for your convenience.

"But a study by Paul G, Joy Ishii and Andrew Metrick found that while large ownership stakes in insiders’ hands tend to improve corporate performance, heavy control by insiders weakens it. They tend to take on more debt, rather than dilute control through share offerings than single-share companies. Other studies found CEOs enjoy higher levels of compensation and shareholders enjoy less return on capital investments, while wasting cash and chasing goals that are personally important to those in control–not shareholders."

Dual class structure is good for the CEO and board but not necessarily good for shareholders or employees. If they want control then why don't they put their money on the line and buy a majority stake?

 

[TxRoadDawg]

"There’s little evidence (at least that I can find) that these kind of companies underperform peers in the market, or even trade at a discount to single-share peers. But a study by Paul G, Joy Ishii and Andrew Metrick found that while large ownership stakes in insiders’ hands tend to improve corporate performance, heavy control by insiders weakens it. They tend to take on more debt, rather than dilute control through share offerings than single-share companies. Other studies found CEOs enjoy higher levels of compensation and shareholders enjoy less return on capital investments, while wasting cash and chasing goals that are personally important to those in control–not shareholders."

I'd love to see all shares equal, might be a deterrent to pencil pushers ramming bull**** down the chain

 

[p228]

You left of the sentence following the one you quoted. Here's the rest of the quote for your convenience.

"But a study by Paul G, Joy Ishii and Andrew Metrick found that while large ownership stakes in insiders’ hands tend to improve corporate performance, heavy control by insiders weakens it. They tend to take on more debt, rather than dilute control through share offerings than single-share companies. Other studies found CEOs enjoy higher levels of compensation and shareholders enjoy less return on capital investments, while wasting cash and chasing goals that are personally important to those in control–not shareholders."

Dual class structure is good for the CEO and board but not necessarily good for shareholders or employees. If they want control then why don't they put their money on the line and buy a majority stake?

How does any of that apply to UPS? We constantly here people in the financial sector says our CEO and board members are underpaid. Both that and your other article are namely referencing new to the market tech companies.

Why give control to people who have no interest in the long term sustainability of the company beyond the size of their dividend?

You left of the sentence following the one you quoted. Here's the rest of the quote for your convenience.

The point of the quote was to disprove your early statement:

"I have to think like a shareowner and I believe reducing the voting power of A shares will unlock some value."

​

 

[SignificantOwner]

How does any of that apply to UPS? We constantly here people in the financial sector says our CEO and board members are underpaid. Both that and your other article are namely referencing new to the market tech companies.

Were no different than any other public company. 96℅ of public companies have only one class of common stock worth one vote per share. If a small group of individuals want control then why don't they use their own money to buy a majority stake?

Why give control to people who have no interest in the long term sustainability of the company beyond the size of their dividend?

The pension plans and mutual funds that own our stock have no interest in our sustainability? Come on, of course they do. If a small group of owners want control they can use their own money to buy a majority stake.

The point of the quote was to disprove your early statement:

"I have to think like a shareowner and I believe reducing the voting power of A shares will unlock some value."

​

The last sentence of the same paragraph says

"Other studies found CEOs enjoy higher levels of compensation and shareholders enjoy less return on capital investments, while wasting cash and chasing goals that are personally important to those in control–not shareholders."

I've done some reading on the topic and formed an opinion. Everyone should read up on it before making up their minds. More available on the topic at:

related:VbSesPoZ3IoJ:scholar.google.com/ - Google Scholar