Welcome to our 2019 Annual
Meeting of Stockholders.
Chairman and Chief Executive Officer
2019 Voting Results
With: 94.1% | Against: 4.1% | Abstain: 0.2%
With: 95.7% | Against: 4.1% | Abstain: 0.2%
With: 91.3% | Against: 8.4% | Abstain: 0.3%
With: 28.6% | Against: 71.1% | Abstain: 0.3%
Proposal 1: Election of Directors
Set forth below are profiles for each of the four candidates nominated by the Nominating and Corporate Governance Committee of the Board of Directors for election by shareholders at this year’s Annual Meeting each with one-year terms expiring in 2020. Directors are elected by a majority of votes cast. At the 2018 Annual Meeting, shareholders voted to declassify the Board of Directors. Directors will be elected to one-year terms of office starting at the 2019 Annual Meeting of Shareholders. Directors elected at the 2018 Annual Meeting of Shareholders were elected to three-year terms expiring at the annual meeting in 2021 (except for Ms. Haussler, who was nominated to join the class of directors whose term expires in 2019). Directors currently serving three-year terms will serve the remainder of their respective terms, and thereafter they or their successors will be elected to one-year terms. After the 2021 Annual Meeting of Shareholders, all directors will stand for election annually.
The Board of Directors recommends that Shareholders vote “FOR” the following four nominees.
Proposal 2: Proposal to Ratify the Selection of the Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors of the Company has recommended PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) to serve as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2019. PricewaterhouseCoopers and its predecessors have audited the Company’s accounts since 1993. A representative of PricewaterhouseCoopers is expected to be present at the Annual Meeting, and such representative will have the opportunity to make a statement if he or she desires to do so and be available to respond to appropriate questions at such meeting. The Audit Committee wishes to submit the selection of PricewaterhouseCoopers for shareholders’ ratification of the selection at the Annual Meeting. If the shareholders do not give approval, the Audit Committee will reconsider its selection. The affirmative vote of the holders of a majority of shares represented at the Annual Meeting will be required for this proposal to be ratified.
The Board of Directors recommends that Shareholders vote “FOR” ratification of the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company.
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation
Pursuant to SEC rules, we are asking shareholders to approve, on an annual basis, the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and any related material contained in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive pay program and policies through the following resolution:
“Resolved, that the shareholders approve the compensation of our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, and any related material contained in our Proxy Statement.”
The compensation of our executive officers is based on a program that ties a substantial percentage of an executive’s compensation to the attainment of financial and other performance measures that, the Board believes, promote the creation of long-term shareholder value and position the Company for long-term success. As described more fully in the Compensation Discussion and Analysis, the mix of fixed and performance-based compensation and the terms of annual and long-term incentive awards are all designed to enable the Company to attract and maintain top talent while, at the same time, creating a close relationship between performance and compensation. The Compensation Committee and the Board of Directors believe that the design of the program, and therefore the compensation awarded to Named Executive Officers under the current program, fulfills this objective.
Shareholders are urged to read this Compensation Discussion and Analysis section of this Proxy Statement, which discusses in detail how our compensation policies and procedures implement our compensation philosophy.
Although the vote is non-binding, the Compensation Committee will review the voting results in connection with their ongoing evaluation of the Company’s compensation program. The Committee in recent years has considered the feedback from shareholders in making specific compensation plan changes. Our compensation plan was well received by our shareholders as reflected in our annual say-on-pay vote last year when over 89% of the shares voted were in favor of the Named Executive Officer compensation. Approval of this proposal is subject to the approval of a majority of the holders of shares of the Company’s common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. Each holder of our common stock is entitled to one vote for each share held. Abstentions will have the same effect as a vote AGAINST this proposal. Broker non-votes are not counted.
The Board of Directors recommends a vote “FOR” advisory approval of the resolution set forth above.
PROPOSAL 4: Shareholder Proposal to Require an Independent Board Chairman
The International Brotherhood of Teamsters on behalf of the Teamsters General Fund, 25 Louisiana Avenue, NW, Washington DC 20001, which represents that the Teamsters General Fund is the beneficial owner of 141 shares of common stock, has given notice that it intends to present the following resolution at the annual meeting.
In accordance with proxy regulations, the shareholder proposal and supporting statement presented below appear exactly as submitted. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including sources referenced in the supporting statement.
For the reasons set forth in The Board’s Statement in Opposition, which immediately follows the proposal, our Board of Directors unanimously recommends that stockholders vote AGAINST this proposal.
Resolution Proposed by Shareholder
RESOLVED: Shareholders of Service Corporation International (“SCI” “the Company”), urge the Board of Directors (the "Board") to take the steps necessary to adopt a policy to require that, to the extent feasible, the Chairman of the Board shall be an independent director who has not previously served as an executive officer of the Company. The policy should be implemented so as not to violate any contractual obligations. The policy should also specify the process for selecting a new independent chairman if the current chairman ceases to be independent between annual meetings of shareholders; or if no independent director is available and willing to serve as chairman.
In January 2016, CEO Thomas Ryan took over as Chairman from founder and former CEO Robert Waltrip, who continues to serve at the Company as Chairman Emeritus. This was a missed opportunity, we believe, to establish true independent board leadership through the appointment of an independent chair. Such leadership is urgently required given that the board bears many of the hallmarks of an insular and entrenched Board, including, as of the 2018 annual shareholder meeting:
- Five directors with more than a quarter of a century service apiece, including the lead independent director.
- A Nominating and Corporate Governance Committee with an average director tenure of more than 19 years.
We believe the combination of these two roles in a single person weakens a corporation's governance, which can harm shareholder value.
It is difficult to overstate the importance of the Board of Directors’ responsibility to protect shareholders’ long-term interests by providing independent oversight of management. In our opinion, the designation of a lead independent director is not an adequate substitute for an independent board chairman. We believe an independent chairman can enhance investor confidence in our Company and strengthen the independent leadership of the Board.
We urge your support FOR this proposal.
The Board’s Statement in Opposition
The Board has carefully considered the above proposal. The Board finds that its current leadership structure provides the necessary independence and management oversight and that the proposal is not in the interest of the shareholders. Moreover, in both May of 2017 and May of 2018, our shareholders considered substantially similar proposals submitted by the same shareholder. Of the shares voted, 59.38% voted against the proposal in 2018 and 63.72% voted against the proposal in 2017. Accordingly, our Board recommends that you vote AGAINST the proposal.
Our Board of Directors believes shareholders are best served by giving the Board organizational flexibility.
Our Board believes that it is uniquely qualified to evaluate the optimal leadership structure for the Board on behalf of our Company and shareholders. The Board has extensive experience with, and knowledge of, our Company’s strategy, operations, management structure, and culture, as well as the strengths, skills and leadership styles of our directors and management.
Effective corporate governance requires consideration of the dynamics of the Board and senior management and other factors on an ongoing basis, rather than a universal approach with unnecessary constraints on the Board's flexibility.
Our Board believes that the current structure is effective.
A. Lead Director
Our Board has taken several steps to create a balanced governance structure in which independent directors exercise substantial oversight over management. Effective in January 2016, our Board established the position of Lead Director. The Lead Independent Director is appointed annually by the independent directors. As provided in our Lead Independent Director Charter, the Lead Director has responsibilities that include:
- Calling meetings of the Board;
- Upon request, being available for consultation and direct communication with shareholders;
- Presiding at executive sessions of the independent directors;
- Serving as the liaison between the Chairman and the independent directors;
- Presiding at all meetings of the Board at which the Chairman is not present;
- Consulting with the Chairman regarding information sent to the Board, scheduling, and agendas of Board meetings; and
- Consulting with the chairpersons of the Board committees.
These responsibilities of the Lead Director are substantially similar to many of the functions typically fulfilled by a board chairman, and our Board believes that such responsibilities provide an opportunity for the independent directors to discuss management performance and any other issues with candor and independence.
B. Chairman and Chief Executive Officer
Our Board has carefully and repeatedly considered the separation of the Chairman and Chief Executive Officer roles and has determined that the Company and its shareholders are best served by Mr. Ryan performing both functions. Our Board believes that this structure allows the Chief Executive Officer to effectively and efficiently guide the Board utilizing the insight and perspective he has gained by running the Company. In addition, our Chief Executive Officer has the necessary experience, commitment, and support of the other Board members to carry out the role of Chairman effectively. His in-depth knowledge of our Company, our growth and historical development, coupled with his extensive industry expertise, significant leadership experience and valuable experience gained serving on independent boards, make him particularly qualified to lead discussions at the Board level on important matters affecting us. Our Board believes shareholders have benefited from Mr. Ryan’s strategic and operational insights and strong leadership skills across the full range of Company leadership responsibilities, ranging from day-to-day operational execution to long-term strategic direction, including leadership in significant acquisition and capital allocation decision-making, as well as risk management. Our performance under the current leadership structure has been strong, strengthening the position of our Company as the leader in the death care industry.
C. Independent Directors
Nine of our Board’s eleven directors are independent under NYSE rules. Our independent directors have robust roles in overseeing our Company and its management. All of the members of each of the Audit, Compensation and Nominating and Corporate Governance Committees are independent. The committees play an important role in our Company’s governance and have unrestrained access to management and the authority to retain independent advisors as they deem appropriate. This means that oversight of key matters-such as the performance and compensation of our executive officers (including the Chief Executive Officer), the integrity of our financial statements, compliance with legal and regulatory requirements, the nomination of directors, and the evaluation of the Board and its committees-is entrusted to independent directors.
The Company’s long-term growth and financial performance reflect the effectiveness of our leadership notwithstanding the expressed concerns of the proposing shareholder.
The Company has achieved long-term total shareholder return of 880% over ten years (as compared to the S&P 500 total shareholder return of 243% over ten years). The Company believes such long-term performance has resulted from the leadership of our officers and directors, including those who have many years of experience and board service with our Company. That experience and tenure has been tempered with exposure to several economic cycles in the death care industry, providing these leaders with a unique understanding for the development and oversight of a sustainable long-term strategy for the Company. Although we believe the members of our Board have served the Company commendably, natural succession planning and our commitment to inclusion and diversity in our Board have resulted in the following recent changes:
- Mr. R. L. Waltrip, our former chairman, stepped down from that position in 2015 and chose not to seek another term as a director in May of 2018.
- After thirty-six years of service, Mr. Mecom has decided that he will not stand for re-election to the board of directors in May of 2019.
- The election of Dr. Ellen Ochoa in 2015, Ms. Sara Martinez Tucker in 2018, and Ms. Jakki Haussler in 2018, will increase the number of women on our Board to 30% in May of 2019.
- Our average director tenure will decrease from 24 to 15 years in May of 2019.
- Only one member of executive management is also a Director.
Based on the foregoing, our Board believes that adopting a policy that requires an independent board chairman is not in the interest of our Company and shareholders.
The Board of Directors recommends a vote “FOR” advisory approval of the resolution set forth above.