February 1, 2014 in Business

At Costco’s annual meeting, shareholder proposals fall short

Angel Gonzalez Seattle Times
 

SEATTLE – Costco offered up the usual array of astonishing statistics at its annual meeting Thursday, but shareholders did not deliver the numbers to pass two measures that would have given them more influence over the retailer’s corporate governance.

Company Chairman Jeff Brotman told shareholders that a proposal to lower the threshold for future shareholder votes to a simple majority from a two-thirds majority didn’t pass.

He also said that a measure seeking to declassify the board – that is, to elect all the board’s directors annually instead of having them serve staggered three-year periods – failed as well. So it’s status quo for how things are run at the Issaquah-based giant.

The company didn’t disclose the exact percentage of the votes during the meeting, which was held in Bellevue. Chief financial officer Richard Galanti said that a majority of the votes cast favored electing all directors annually, but they fell short of the two-thirds of all shares the proposal needed to pass. “It’s a high hurdle,” he said.

The proxy-advisory firm ISS had recommended that Costco shareholders approve both the change to a simple majority and holding all directors accountable in annual elections.

The results underscore, nevertheless, how Costco’s management remains relatively popular with shareholders after delivering growth through the recession and defending its turf from online retailers.

Costco’s business model is also riding high after being praised by President Barack Obama at Tuesday’s State of the Union address. That clearly resonated with faithful investors.

“They believe in treating their workforce properly,” said Andrea McCabe, one of the hundreds of shareholders who attended the meeting. “Can you deny it when the president of the United States praised Costco in the State of the Union?”

Costco posted higher than expected traffic during the holiday season, in which many retailers lost customers to the likes of Amazon.

Chief Executive Craig Jelinek told shareholders that “Amazon is going to be a very stiff competitor” and that if Costco ever finds out that it’s financially feasible to bet more heavily on home delivery of products sold online, it will do so.

“Where we stand right now, we don’t think that’s something we need to get ourselves into,” he said.

Last year Costco sold 112 million hot dog and soda combos; 69 million rotisserie chickens and 114,000 carats of diamonds, including a $68,000 rock, Jelinek said.


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