Arthur J. Gallagher & Co. (AJG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. This is Pat Gallagher, Chairman of the Board, President and CEO of Arthur J. Gallagher & Co. I will be presiding over today's meeting. It is now my pleasure to officially call to order the 2020 Annual Meeting of Stockholders of Arthur J. Gallagher & Co. Thank you for joining us this morning. We are conducting the annual meeting virtually this year instead of in person in light of the public health concerns relating to the ongoing COVID-19 pandemic. The agenda and rules of conduct have been provided on the virtual meeting website. Rules of conduct outline how we will proceed with today's meeting. In order to conduct an informative, orderly and constructive meeting, we ask the participants abide by these rules. [Operator Instructions] Thank you for your cooperation with these rules. It is now my pleasure to introduce the other members of the Board, all of whom are in attendance today: Sherry Barrat, William Bax, John Coldman, Frank English, Dave Johnson, Kay McCurdy, Chris Miskel, Ralph Nicoletti and Norman Rosenthal. I want to pause for a second to recognize the outstanding work of our Board on behalf of stockholders. Our outside directors bring a wide range of experience and expertise to our company. They provide great guidance and advice, and I am personally grateful to all of our directors for their service. Walt Bay, the company's General Counsel and Secretary, is also joining us today. Walt will act as secretary of the meeting. Also joining today's meeting are the inspector of election, [ Lee Grant ] of Broadridge Investor Services; and Ron Genty and [ Matt Demander ] of Ernst & Young, the company's independent auditor. The polls opened at the beginning of the meeting, and we will close the polls on all matters immediately after the presentation of today's proposals. If you wish to vote during our meeting, please file the instructions on the meeting website before the poll is closed. If you have already voted in advance of the meeting, you do not need to vote again, unless you wish to change your vote. The inspector of election has taken the required oath and is certified that notice of this meeting was mailed, beginning on March 27, 2020, to all stockholders of record as of the record date and that a majority of our common stock, issued and outstanding, and entitled to vote at this meeting is present or represented by proxies, so a quorum exists for the meeting. The meeting is now open for the purpose of transacting business properly before it. Each of the proposals to be voted on today is set forth in our proxy statement. I will now briefly describe each of the proposals. The first proposal is the election of the 10 nominees named in our proxy statement to serve as directors until the 2021 annual meeting. The company has an advanced notice provision for director nominations in its bylaws. Because no advanced notice was received, all nominations are closed. The second proposal is the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2020. The third proposal is an advisory vote to approve the compensation of our named executive officers. In addition to the 3 company proposals I have just described, we have one stockholder proposal to be voted on. The proponent will have 3 minutes to present the proposal. It is my pleasure to introduce Ms. Yumi Narita of the Office of the New York City Comptroller, who will now introduce a stockholder proposal to adopt the diversity search policy. Operator, please open the line for Ms. Narita. Ms. Narita, your line is now open. You may proceed.

Thank you, Mr. Gallagher. As noted, my name is Yumi Narita, and I'm here to present Proposal 4 on behalf of New York City Comptroller, Scott Stringer, and 4 out of 5 New York City Pension Funds. The funds have approximately $204 billion in assets as of February and are substantial long-term Arthur J. Gallagher share owners with approximately 189,000 shares. Our proposal requests that the Board adopt a diversity search policy requiring that the initial candidates from which new director nominees and external CEOs are chosen include qualified female and racially or ethnically diverse candidates. This is a version of the Rooney Rule pioneered by the National Football League. First of all, we would like to thank the directors for clarifying their director nomination process with an update made to your governance guidelines as of January. It is heartening to hear that the Nominating and Governance Committee has always sought out diverse candidates, and now it is institutionalized for the benefit of share owners, employees and customers. Secondly, we recognize that the Board is made up of 20% women and has added Mr. Christopher Miskel as of March. We believe these actions reflect the 12th value of The Gallagher Way, "No department or person is an island." We believe that no Board is an island, and the tone at the top matters that a company that employs individuals from all over the globe. One further request might be to update the Board of Directors page on the company's website with photos and names of all of your directors. Finally, we would like to applaud Arthur Gallagher's robust internal CEO succession plan and the firm commitment that is made to create a diverse pipeline for executives. Similarly, we appreciate that Mr. Gallagher has taken the CEO Action for Diversity & Inclusion pledge. We would reiterate that the diversity language we are proposing would be for external CEO candidates only and do not see this language as detracting from the commitment the company has made to its employees. Instead, we would suggest that including Rooney Rule language for an external CEO candidate search would demonstrate to your employees as well as your share owners, that management and the Board have proactively thought through the long-term strategy of the company. And that even in the unlikely event that a candidate is sourced from outside the company, Arthur J. Gallagher will continue to maintain its commitment to a diverse pipeline. We'd also note, in closing, that the following engagement with the comptroller's office, 76% of the companies where we file the share owner proposal have now publicly committed to applying the Rooney Rule for their director and external CEO searches. These companies include Activision Blizzard, Expedia, Hilton Worldwide Holdings, Verisign and Ross Stores. We strongly urge Arthur Gallagher share owners to support Proposal 4. Thank you.

Thank you, Ms. Narita. The Proxy Statement for this meeting explains the reasons for the company's recommendation against the stockholder proposal. We will now pause to address any stockholder questions we've received relating to these proposals. I'll ask our secretary, Walt Bay, to advise whether any questions have been received.

Good morning, Pat. I can confirm that we have not received any questions regarding the proposals.

As there are no questions on the proposals, I now declare the polls closed. We've been informed by the inspector of election that based on the preliminary voting results, each nominee for the election of the Board of Directors has been duly elected, each of the other company proposals voted on has been approved, and a majority of shares present and entitled to vote have voted against the stockholder proposal. Following the meeting, we will publicly announce the official voting results once all the verifications have been completed by the inspector of election. The formal portion of the meeting is now adjourned. We will now address general stockholder questions we have received in accordance with the meeting rules of conduct. Walt, please advise if we have received any questions.

Pat, there are no questions from stockholders this morning.

Thank you, Walt. As there are no questions, this concludes our 2020 Annual Meeting of Stockholders. Thank you all for participating.

Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect.