Marathon Petroleum Corporation (MPC) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by and welcome to the Marathon Petroleum Corporation Annual Meeting. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Molly Benson. Ma'am, please go ahead.

Good afternoon, and welcome back to Marathon Petroleum Corporation's 2020 Annual Meeting of Shareholders. My name is Molly Benson, and I'm MPC's Vice President and Corporate Secretary. Mr. Chairman, we have tabulated the vote on proposal 1 and are prepared to proceed with voting on proposals 2 through 6.

Thank you, Molly. Please present the report on voting for proposal 1.

Mr. Chairman, I will report today the results our inspector of elections has provided upon an examination of the voting results for proposal 1. Final results will be reported to the Securities and Exchange Commission within 4 business days of today's meeting on a current report on Form 8-K. Regarding proposal #1 to approve an amendment to MPC's restated certificate of incorporation to phase out the classified Board of Directors, approximately 441 million votes have been cast for this proposal. This is less than the number required for approval of the proposal.

Based on Molly's report, I declare that proposal 1, to approve an amendment to MPC's restated certificate of incorporation to phase out the classified Board of Directors, has been defeated. We will now proceed with the introduction of proposals 2 through 6. We will address questions on proposals after all have been presented. I now declare the polls open with respect to proposals 2 through 6 on April 29 at 2:04 p.m. As indicated in the MPC proxy statement, you may vote today only if you are a shareholder of record or you hold a legal proxy. If you haven't yet voted or wish to change your vote, you may do so by now clicking on the Vote Here button on the meeting portal and following the instructions. If you have already voted, you do not need to take any further action unless you wish to change your vote. Proposal #2 is the election of the following 4 nominees, each of whom appears in our proxy statement to serve as Class III directors for a 3-year term. The nominees for Class III Director are: Steve Davis, Mike Stice, John Surma and Susan Tomasky. Proposal #3 is the ratification of the selection of PricewaterhouseCoopers LLP as our independent auditor for 2020. Proposal #4 is the proposal for approval on an advisory basis of the company's named executive officer compensation as disclosed in the proxy statement. Proposal #5 is a shareholder proposal seeking simple majority vote provisions. If a representative of proposal 5 is on the line, please state your name and present your proposal.

Hello, this is John Chevedden. Can you hear me okay?

We can, John.

Yes. This is proposal 5, a simple majority vote. This is an important proposal topic that also could apply to other stock that Marathon shareholders own. Shareholders request that our Board take each step necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated and replaced by a requirement for a majority of the votes cast for and against applicable proposals or a simple majority of the votes cast. Shareholders are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements have been found to be 1 of 6 entrenching mechanisms that are negatively related to company performance according to "What Matters in Corporate Governance" by Lucian Bebchuk of the Harvard Law School. Supermajority requirements are used to block initiatives supported by most shareholders today. In particular, proposal won, but were long resisted by a status quo management. This proposal topic won from 74% to 88% support at Alcoa, Waste Management, Goldman Sachs, First Energy and Macy's. This same proposal topic won more than 99% support at the 2018 Marathon Petroleum Annual Meeting, but it still needed more votes to be approved. Our management could have adjourned the annual meeting in 2018 to obtain these votes but failed to do so. This proposal will pave the way for shareholders -- it will pave the way for adoption of annual election of each director, which was just defeated because it needed 80% vote in order to address complacency by our directors as our stock fell from $60 to $30 in 1 year. Meanwhile, in 2019, directors Birch Bayh and Charles Bunch, each received 5x as many negative votes as another Marathon Petroleum director. Currently, a 1% minority can frustrate the will of our 79% shareholder majority as has just been shown today in this meeting. In other words, a 1% minority could have the power to prevent shareholders from improving the corporate governance of our company like annual election of each director, which was just defeated. This can be particularly important during periods of management underperformance and an economic downturn, which we certainly are in today. Certainly, the role of shareholders is downsized because management can simply ignore an overwhelming 79% vote of shareholders under the current rules. Please vote yes simple majority vote proposal 5.

Thank you, Mr. Chevedden. The Board's response to this proposal is found on Page 68 of the proxy statement. Proposal #6 is a shareholder proposal seeking a report on integrating community impacts into the company's executive compensation program. If a representative of Proposal 6 is on the line, please state your name and present your proposal.

Good afternoon, Mr. Chairman, members of the Board and fellow shareholders. My name is Susan Baker. I'm a Vice President at Trillium Asset Management. And on behalf of our client, The Sundance Family Foundation, I'm here to move proposal #6, which addresses community impacts. The proposal before you centers around a report -- a request for a report that really addresses the feasibility of integrating community stakeholder concerns and impacts into the company's executive compensation program. Why a community stakeholder metric? We know that executive compensation plans are built on the premise that you get what you pay for. From our conversations with management, it is clear that we all want Marathon to be a good community member in each and every community that Marathon operates in. But the current compensation plan, in our view, does not incentivize that and deal potential environmental and social negative impacts to communities near your Detroit facility, for example, and those near operations in Garyville, Louisiana and Texas City, Texas, where hundreds of tons of toxic hydrogen fluoride are stored, are worrisome. Attention to these community impacts from local and also national news outlets in recent years has reinforced our belief that perhaps something in the executive compensation incentive structure is not quite working as it should. So why now? Well, in August 2019, last year, we were pleased to learn that Marathon's CEO joined 180 additional CEOs in signing the Business Roundtable's revised statement on the purpose of a corporation. Signing this statement publicly pledged the CEOs to operate their businesses in a manner so that all stakeholders, employees, customers, communities, suppliers and shareholders, benefit. This is great. Marathon was on the right side in joining this statement, and we firmly believe that committing to all stakeholders must be the foundation of its business strategy going forward. Especially during this pandemic, we have clearly seen why this is the right approach. So what does this mean for Marathon? It means having the right incentive mechanisms in place. And now is a good time to explore how to do that effectively. Thank you for your time and consideration.

Thank you, Susan, and we take our responsibility very, very -- is a very, very important part of our work. The Board's response to this proposal is found on Page 70 of the proxy statement. If any shareholder has a question or comment regarding any of proposals 2 through 6, please submit it now through the meeting portal. I'll pause for a moment to see if there are any questions or comments.

Mr. Chairman, we do not have a question on 2 through 6. We do have one on proposal 1 that I'm happy to answer. The question is, what was the percentage of the vote that I reported. It's approximately 68% of the shares outstanding. And that's the only question we have.

All right. Thank you. There being no further questions, I will now declare the polls closed with respect to proposals 2 through 6 on April 29, 2020, at 2:12 p.m. I will now ask Molly to present the preliminary report on voting for proposals 2 through 6.

Thank you, Mr. Chairman. I will report today the results our inspector of elections has provided upon a preliminary examination of the voting results for proposals 2 through 6. Final results will be reported to the Securities and Exchange Commission within 4 business days of today's meeting on a current report on Form 8-K. Regarding proposal #2, each of the 4 nominees for Class III director has received the requisite number of votes for election and will serve until his or her successor has been duly elected and qualified. Regarding proposal #3, the ratification of the selection of PWC as our independent auditor, approximately 528 million votes have been cast for such ratification. This is more than the number required for ratification. Regarding proposal 4, for approval on an advisory basis of the company's named executive officer compensation as disclosed in the proxy statement, approximately 400 million votes have been cast for this proposal. This is more than the number required for approval of the proposal. Regarding proposal #5, a shareholder proposal seeking simple majority vote provisions, approximately 438 million votes have been cast for this proposal. This is more than the number required for approval of the proposal. Regarding proposal #6, a shareholder proposal seeking a report on integrating community impacts into the company's executive compensation program, approximately 34 million votes have been cast for this proposal. This is less than the number required for approval of the proposal. Mr. Chairman, that concludes my report.

Based on Molly's preliminary report, I declare that each of the nominees named in the proxy statement has been duly elected as a Class III director, that the selection of PricewaterhouseCoopers as our independent auditor for 2020 has been ratified, that the proposal for approval on an advisory basis of the company's named executive compensation has been approved, that the proposal seeking simple majority provisions has been approved and that the proposal seeking a report on integrating community impacts into the company's executive compensation program has been defeated. The inspector of elections will file his final written report with our Corporate Secretary. Our Corporate Secretary will follow the inspector's oath and his report with the records of this meeting and will file final voting results with the Securities and Exchange Commission. Ladies and gentlemen, we sincerely thank you for your investment in Marathon Petroleum Corporation and for your attendance at this meeting today. Our annual meeting is hereby adjourned. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect.