Shareholders of Cummins Inc. have voted in favor of directors nominated by the company’s board but rejected proposals to tie executive compensation to climate performance and split the chairman and chief executive officer roles.
The votes took place during Cummins’ annual investor meeting Tuesday, which was held virtually, and came just one week after the Columbus-based company reported record revenue during the first three months of the year and raised its revenue forecast.
The slate of 12 director nominees included President and CEO Jennifer Rumsey and Chairman of the Board and Executive Chairman Tom Linebarger, the only Cummins employees on the board. The remaining board members come from outside the company.
Rumsey has been a director since last year, while Linebarger has been a director since 2009.
Shareholders also considered two proposals — one that would have tied executive compensation to greenhouse gas emissions reductions and another that would have split the chairman and chief executive officer roles.
The emissions proposal, submitted by shareholder advocacy group As You Sow on behalf of Cummins shareholders, asked the board to disclose a plan to link executive compensation to greenhouse gas emissions reductions that are aligned with the international goal of trying to limit future warming to 1.5 (2.7 degrees Fahrenheit) since pre-industrial times.
The group argued in its proposal linking executive compensation to emissions reductions would “incentivize leadership to prioritize climate performance while providing board oversight on this important issue.”
The board had urged investors to reject the proposal, stating in a proxy statement filed with regulators the proposal was “not in the best interest of the company and its shareholders at this time” and highlighted the company’s decarbonization and sustainability strategies.
“While we are committed to furthering our sustainability efforts, our core values guide how we approach fulfilling that commitment,” the board said in a statement of opposition. “As such, we believe it would be irresponsible to commit to the proponent’s requested actions before completing the necessary foundational steps, many of which were underway before we received the proponent’s proposal.”
Additionally, shareholders considered a proposal that sought to divide the company’s chairman of the company’s board and CEO roles into two separate positions that would be filled by two different people.
The proposal, submitted by a Cummins shareholder, contended the chairman and CEO “are fundamentally different” roles and should be held by two different people with the chairman who comes from outside the company “whenever possible.” Similar proposals were voted down in 2022, 2019, 2015 and 2013.
The board of directors also recommended shareholders to vote against the proposal, arguing in a proxy statement filed with regulators that shareholders would be “best served if the board retains the organizational flexibility to select the best person to serve as chairman,” even if that person also is CEO.
Currently, the two roles are held by two different people. Rumsey is serving as CEO, while Linebarger, the company’s former chief executive, is chairman of the board. Linebarger previously held both roles before Rumsey was promoted to chief executive last year.
“Our board has the freedom to determine the optimal leadership structure for the company, including when appropriate separating the roles of chairman and chief executive officer, based solely on what it believes is in the best interests of the company and its shareholders,” the board said in its proxy statement. “Given the dynamic and competitive environment in which the company operates, this flexibility allows our board to decide what leadership structure works best for our company based on the facts and circumstances existing from time to time.”
Currently, it is unclear what percentage of investors voted against the two proposals. Company officials did not provide detailed results during the meeting but said they planned to file the results with federal regulators following the meeting.
The filing was not made before press deadline.