Twenty funds and stockholder groups have sharply criticized Omnicom for bypassing a free SEC process to sue stockholder John Chevedden, a critic of OMC pay and governance practices.
Chevedden was sued in four federal courts for trying to block OMC execs from having exclusive access to stockholder voting prior to the annual meeting. He and others have criticized OMC’s pay practices, which included packages worth a total of $84.5 million to CEO John Wren and CFO Randy Weisenburger in 2012.
U.S. District Courts in New York and Boston rejected such attempts.
Chevedden claimed that such actions have a “chilling effect” on stockholder democracy.
A letter dated March 17 to Wren by the 20 funds and stockholder groups raps him for having “chosen to pursue an expensive litigious process rather than the time honored SEC route to stop an investor from submitting a resolution for a vote at the 2014 stockholder meeting.”
Such suits “diminish the authority of the SEC and are unnecessary,” the letter says.
Litigation, it continues, “is costly to all parties involved—the shareholder being sued, the corporation bringing the suit, and the court system, which must spend taxpayer money and judicial time in mediating a process that has been otherwise properly adjudicated by the no-action process at the SEC for a much lower cost to both the proponent and the corporation.”
Many of Chevedden’s proposals have historically garnered from 40-90% of the votes and his resolutions often receive a majority of such votes, the letter says.
Investor Groups Cite Bad PR
It asks if OMC is “concerned about the potentially negative public reaction that Omnicom is using the court system and taxpayer dollars for a procedure that could otherwise easily be refereed by the SEC?”
It also asks if the OMC board has “approved management’s high-risk plan to engage in unnecessary litigation rather than constructive engagement?”
Chevedden and GMI Ratings, co-founded by Nell Minow, have criticized OMC on a number of practices besides allegedly outsize pay packages including a board of directors whose members stay too long, perhaps losing their independence and objectivity.
GMI has given OMC a “D” since 2005 on executive pay, governance practices, and length of service by directors.
The directors are all either financial or corporate executives. None are creatives. Their average pay from OMC in 2012 was $224,969, a 25% boost from 2011.
Signers of the letter to Wren are:
Northstar Asset Mgmt.
Boston Common Asset Mgmt.
Clean Yield Asset Mgmt.
Walden Asset Mgmt.
Everence/The Praxis Mutual Funds
First Affirmative Financial Network
Manhattan Country School
Pax World Mgmt.
Nathan Cummings Foundation
Ziven Asset Mgmt.
Green Century Capital Mgmt.
Interfaith Center on Corp. Responsibility
Nora M. Nash, OSF
Frank Sanches, Exec. Dir., Needmore Fund
Trillium Assn. Mgmt.