CDW Corporation (CDW) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the CDW Annual Shareholder Meeting. I would now like to turn the call over to Chris Leahy. Please go ahead.

Thank you. And good morning, and welcome to CDW's 2020 Annual Meeting of Stockholders. I'm Chris Leahy, Chief Executive Officer of the company, and I will be chairing our meeting. Given the COVID-19 pandemic, we are hosting our meeting virtually this year for the safety of all participants. Before we call the meeting to order, I would like to thank all of our frontline workers for their efforts as well as all CDW coworkers for their dedication to providing essential technology to our customers during this uncertain and challenging time. It is now 7:30 a.m. Central Standard Time on May 21, and this meeting is officially called to order, and the polls are open. An agenda for the meeting with the rules relating to the conduct of the meeting are posted on the web portal. We will conduct the business part of our meeting first, and we'll take stockholder comments and questions after the meeting has adjourned. If you are a stockholder and would like to vote your shares at the meeting, you can vote by clicking on the voting button on the web portal and following the instructions there. If you have already sent in your proxy, there is no need to vote, unless you wish to change your vote. Stockholders may submit comments or questions through the designated field in the web portal. To vote or submit comments or questions, you must be logged into the meeting as a validated stockholder. I would like to now introduce the other members of our Board of Directors: Virginia Addicott; Steve Alesio; Barry Allen; James Bell, Ben Chereskin, Lynda Clarizio, Paul Finnegan, David Nelms, Joe Swedish, Donna Zarcone. Directors, thank you for your service to CDW. Next, I would like to introduce the representatives from Ernst & Young, our independent registered public accounting firm: Ram Ramanan and Darren Ludwig. They are available to respond to stockholder questions during the question-and-answer session after the meeting has adjourned. I would also like to introduce Rick Kulevich, Senior Vice President, General Counsel and Corporate Secretary of the Company, who will act as secretary at this meeting. I would like to call upon him to give the secretary's report.

Thank you, Chris. An Affidavit has been filed with me, certifying that our notice and proxy materials for today's meeting have been duly given to our stockholders of record at the close of business on March 25, 2020. [ Gerry Lane ] of Broadridge is serving as our inspector of election, has taken the oath of the inspector of election and has confirmed that a majority of the shares entitled to vote at this meeting is present in person or represented by proxy. Therefore, a quorum is present for purposes of conducting the official business of this meeting, and this meeting is properly convened.

Thank you, Rick. There are 3 items of business on the agenda for today's meeting. Please refer to the proxy statement for a complete description of these items. The first item of business is the election of 7 directors. The individuals nominated are Steve Alesio, Barry Allen, Lynda Clarizio, Chris Leahy, David Nelms, Joe Swedish and Donna Zarcone. These 7 individuals comprise the current Class I and Class III Directors. The company has not received notice of any other nominations by a stockholder in accordance with the requirements set out in our bylaws. The second item of business is to approve, on an advisory basis, named executive officer compensation. The third item of business is to ratify the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the year ending December 31, 2020. It is now 7:34 a.m., and we will now close the polls. Rick will now report on the preliminary voting results for the 3 items of business identified on the agenda.

The preliminary count from the inspector of election shows that each of the nominated directors has been elected; stockholders have approved, on an advisory basis, named executive officer compensation; and stockholders have ratified the selection of Ernst & Young LLP as the company's independent registered accounting firm for 2020. The final report of the inspector of election containing the exact number of votes on each proposal will be filed with the minutes of this meeting.

Thank you, Rick. Since there is no further business to come before this meeting, I hereby adjourn the meeting and will respond to stockholder comments and questions. Brittany Smith, our Vice President, Investor Relations and Financial Planning and Analysis, will read stockholder comments and questions. Brittany, have we received any questions?

Yes, Chris. Our first question is directed to our Chairman. The question says: the recent dramatic growth and the size of passive mutual funds' corporate ownership interest in U.S. corporations raises foreign public policy and corporate governance issues. Currently, BlackRock holds 8% and Vanguard holds 11.9% of the company's outstanding shares. Vanguard is an investment manager for a portion of the assets of the company's retirement plan. Does the [ Federal ] see this growing ownership concentration as a positive or negative development as regards long-term corporate planning and performance? And also, are there potential conflicts of interest when a 5% holder is managing company retirement plan assets? If the operator could unmute David Nelms' line, we'd appreciate it.

I -- the Board has actually not discussed this question, so I'm speaking for myself. But I view the growing ownership as neutral. I think we certainly value all of our shareholders. And we hear from large institutional investors, like BlackRock and Vanguard, but we also value the input of smaller shareholders. And so that's my view. Regarding the retirement plan assets, since we're not in that business, I would not comment on conflict of interest. We obviously wouldn't deal with a conflict -- potential conflict of retirement plan assets. Thank you.

The second question is also directed to David Nelms as well as our EY representative, Ram Ramanan, who is on the phone. The Carpenter union...

[Indiscernible]

Pardon?

Go ahead.

Okay. The Carpenter Union Pension Funds with combined assets of $70 billion have a collective ownership position of 293,014 shares of the company's common stock. As long-term investors, we appreciate the company's actions to address employee safety issues. Audit from independence is critically important to the protection of the integrity of the corporate financial reporting system. One of the means to protect audit from independence is the rotation of the lead audit partner. Could the E&Y representative describe the lead partner rotation process, which should be coming up soon, and indicate who has a decision-making responsibility in selecting the new lead partner? Operator, if you could unmute Ram's line, we'd appreciate it.

Thank you, Brittany. Can you hear me?

Yes. Thank you.

Yes. This is Ram Ramanan from EY. The requirement is for the audit partner to rotate after 5 years. And I just rolled on as the lead partner on the account for the 2019 audit. And the decision to select the audit partner lies with the Audit Committee, as described in the Audit Committee's report in the proxy. Thank you.

Thank you. We have one additional question. This is directed to Chris Leahy. Exactly how does CDW help with a company that wants to implement work from home?

Thank you for that question. Yes, in a number of ways, CDW has, for some period of time, been positioned to be able to have our coworkers work remotely, and we have great infrastructure to do that. So when we moved folks to work from home, we have now more -- about 85% of our coworkers working from home, we were well prepared and did it over a weekend fairly seamlessly. So we provide the equipment, obviously, but then also from a management perspective, tools, training, support resources to help our coworkers work as effectively as possible and stay as connected to their coworkers and to our customers as possible. They're doing a great job, and our customers are benefiting as a result. Thanks so much for the question.

Thank you, Chris. There are no further stockholder comments or questions at this time.

Thank you very much, Brittany, and thank you, David and Ram. That concludes our time today. Thank you all for your participation and your interest in CDW.