Reed’s (REED): How I Voted – Proxy Score 100%

Reed’s ($REED) is one of the stocks in my portfolio. Their annual meeting is coming up tomorrow, on 12/21/2012. ProxyDemocracy.org doesn’t collect votes on REED, probably because it is a micro-cap with little or no institutional ownership.  I voted with all managements recommendations.

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions where something obviously warrants different treatment. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay, Oxford Review of Economic Policy, Vol. 21, Issue 2, pp. 283-303, 2005), aggregate compensation by public companies to NEO increased from 5 percent in 1993-1995 to about 10 percent in 2001-2003.

Few firms want to admit to having average executives. They survey executive compensation at corporations and then set compensation packages that are above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third-world.

REED’s SummaryCompensation Table shows CEO/Chair Christopher J. Reed was the highest paid named executive officer (NEO) at about $217,000 in 2011. I’m using Yahoo! Finance to determine market cap and Wikipedia’s rule of thumb regarding classification. According to those sources, at about $66M REED is micro-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9 & 10), using data from Equilar, the median CEO compensation at small-cap corporations was $2.2 million in 2010… not much help in this instance but the pay appears reasonable to me.

I voted in favor of the directors, the auditor, and even gave my proxy for items that may come up during the meeting.

Get out your calendar. The deadline for submitting proxy proposals for next year’s meeting is August 23, 2013. Proposals should be sent to 13000 South Spring Street, Los Angeles, CA 90061.

In other news on REED’s, it is great to see them moving to the New York Stock Exchange. Maybe they will get some better analyst coverage and a few institutional investors. Then it will be easier to provide corporate governance advice, which I expect to do by the August 23rd deadline.

Liquidity has improved, leveraging is below average, net income looks sustainable, profitability is gaining strength, and the future looks very bright as the company rolls out its new Culture Club Kombucha line of organic live beverages across the nation. These probiotic drinks low in natural sugar are among the first to target sophisticated adult tastes and health conscious sensibilities.  Look for them at Whole Foods and other fine stores.  If your favorite organic grocer doesn’t carry it, ask them to do so.

Product labeling and video ads could use a slightly more informative and professional touch but REED’s now looks like a low risk company with excellent upside opportunity.

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