Good day, ladies and gentlemen, and welcome to your Laboratory Corporation of America Holdings Annual Meeting. All lines have been placed in a listen-only mode. At this time, it is my pleasure to turn the floor over to Adam Schechter. Sir, the floor is yours.
Thank you, Melinda. Good morning, everyone. I'm Adam Schechter, President and Chief Executive Officer and Director of Labcorp, and Chairman of this annual meeting. I'm happy to welcome you to this annual meeting of shareholders. Before we get started, I want to thank our dedicated and mission-driven colleagues around the world who have excelled during this challenging time, working tirelessly on the front line, developing and processing diagnostic tests, and supporting the development of treatments and vaccines to combat the global COVID-19 pandemic. This is also the first annual meeting that David P. King will not be chairing in many years. I want to thank David for his leadership and guidance and for his many contributions to the company over the years. The meeting will now come to order. All votes will be delivered to the Inspector of Election. The Secretary will record the proceedings.
I'd like to introduce to you the board members and officers who are present today. Directors that are present are Kerrii B. Anderson, Jean-Luc Bélingard, Jeffrey A. Davis, D. Gary Gilliland, Garheng Kong, Peter M. Neupert, Richelle P. Parham, and R. Sanders Williams. I would now like to acknowledge our senior officers present today. Lance V. Berberian, Executive Vice President and Chief Information and Technology Officer, Brian J. Caveney, Executive Vice President and President Diagnostics and Chief Medical Officer, Glenn A. Eisenberg, Executive Vice President and Chief Financial Officer, Paul R. Kirchgraber, Executive Vice President and Chief Executive Officer, Drug Development, Mark S. Schroeder, Executive Vice President and President, Diagnostics, Laboratory Operations, and Global Supply Chain, Judith C. Seltz, Executive Vice President and Chief Human Resources Officer, Amy B. Summy, Executive Vice President and Chief Marketing Officer, Sandra D.
van der Vaart, Executive Vice President and Chief Legal Officer, Chief Compliance Officer, and Secretary, and Peter J. Wilkinson, Senior Vice President and Chief Accounting Officer. Also present are David Pickett and Alex Vaughn , representing PricewaterhouseCoopers LLP, independent accountants of the company. They will be available to answer appropriate questions during the general question and answer period after the formal business of the meeting. Before we proceed with the meeting agenda, the Secretary, Ms. van der Vaart, will review certain information related to the meeting.
After the formal meeting has been adjourned, we will also provide time for general questions. Only validated shareholders will be able to submit questions using the designated field on the web portal or through our investor relations email address at investor@labcorp.com. If you choose to submit a question by email, please include your control number in the email subject line in order for your question to be considered. Out of consideration for others, please limit yourself to one question. Consistent with our approach when the annual meetings were held in person, questions or comments that are not related to the proposals under discussion are about employment matters or personal concerns not shared by shareholders generally or use blatantly offensive language may be ruled out of order.
We will, however, respond to questions or comments that are not related to the proposals under discussion or are about personal concerns not shared by shareholders generally via email after the meeting. The board of directors set March 25th, 2020, as the date of record for this shareholders meeting. We have here a record of shareholders as of that date, which is duly certified by our transfer agent and is available during this meeting on the meeting portal for inspection by shareholders. I have been advised by the Inspector of Election that immediately prior to commencement of the meeting, at least 87% of the company's shares of common stock issued and outstanding and entitled to vote are present or represented by proxy at today's meeting. Because the majority of the company's shares is represented here today, a quorum is present, and the business of the meeting may proceed.
The notice for the meeting was duly and properly mailed. Affidavits of mailing of the notice of meeting, proxy card, and proxy statement will be filed with the records of the meeting.
Thank you, Sandra. There are four items on the agenda to be voted on today. One, the election of directors, two, the approval on a non-binding advisory basis of executive compensation, three, the ratification of the appointment of PricewaterhouseCoopers LLP as Laboratory Corporation of America Holdings independent accountants for the year ending December 31st, 2020, four, to vote upon one shareholder proposal seeking the power for shareholders of 10% or more of our common stock to call a special shareholder meeting.
There will be a discussion period relating to each item immediately after its introduction. If any shareholder would like to make a comment regarding any of the proposals at the indicated times, please submit your comment at that time using the designated field on the web portal or through our investor relations email address at investor@labcorp.com with your control number included in the email subject line. We will attempt to ensure that all shareholders' comments are read aloud and representatives of management will respond to questions. However, in the interest of time, and because each of these items has been fully discussed in the proxy statement, discussion on each item, including the presentation of the shareholder proposal, will be limited to five minutes. If you sent in your proxy, you do not need to take any further action unless you wish to change your vote.
At the end of the discussion period relating to the items to be voted on during today's meeting, the ballots will be collected and delivered to the Inspector of Election. The company has appointed Carissa Willett to be the Inspector of Election. She is familiar with the duties and responsibilities of an Inspector of Election at a shareholders' meeting. She will report the results after all proxies and votes have been tabulated. We will now turn to item one.
The first item is the election of directors. The nominees and their qualifications are described in their proxy statement dated April 1st, 2020, which has been made available to all shareholders of record as of March 25th, 2020. Ms. van der Vaart, will you please present the proposal to elect directors?
I move the director nominees be elected pursuant to the following resolution. Resolved that each of Adam H. Schechter, Kerrii B. Anderson, Jean-Luc Bélingard, Jeffrey A. Davis, D. Gary Gilliland, Garheng Kong, Peter M. Neupert, Richelle P. Parham, and R. Sanders Williams be and hereby is elected as director of the company to serve until the next annual meeting of shareholders and until his or her successor is duly elected and qualified, or until his or her earlier death, resignation, or removal.
The meeting is open for discussion relating to the election of directors. If any shareholder would like to make a comment regarding this proposal, please submit your comment through the web portal or by email now.
Mr. Schechter, there are no comments that have been received.
The second item is a non-binding advisory vote to approve executive compensation. Ms. van der Vaart, will you please present the proposal to approve executive compensation?
I move that the company's executive compensation be approved pursuant to the non-binding advisory vote and the following resolution. Resolved that the compensation paid to the company's named executive officers, as disclosed pursuant to the rules of the Securities and Exchange Commission, including in the Compensation Discussion and Analysis, compensation tables, and narrative discussion in the company's 2020 proxy statement, is hereby approved.
The meeting is open for discussion relating to the approval of the company's executive compensation. If any shareholder would like to make a comment regarding this proposal, please submit your comment through the web portal or by email now.
Mr. Schechter, there are no questions or comments that have been received.
The third item is a ratification of the appointment of independent accountants for 2020. Ms. van der Vaart, will you please present the proposal to ratify the selection of accountants?
I move that the appointment of the independent accountants for 2020 be ratified pursuant to the following resolution. Resolved that the appointment of PricewaterhouseCoopers LLP as independent accountants of Laboratory Corporation of America Holdings for the fiscal year ending December 31, 2020, be ratified.
The meeting is open for discussion relating to the selection of independent accountants. If any shareholder would like to make a comment regarding this proposal, please submit your comment through the web portal or by email now.
Mr. Schechter, there are no questions or comments that have been received.
The fourth item relates to the shareholder proposal described in a proxy statement submitted by Mr. John Chevedden. At this time, I would like the Operator to open the shareholder's line to present his proposal. Operator?
Mr. Chevedden-
Hello?
Please go ahead.
Hello, this is John Chevedden. Can you hear me okay?
We can. Thank you.
Proposal four, shareholder right to call a special meeting. Shareholders ask our board to take the steps necessary to amend the appropriate governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting. This proposal topic won 78% support at a Sprint annual meeting with 1.7 billion yes votes. This 78% support might have been even higher if more shareholders had access to independent proxy voting advice. Any claim that a shareholder right to call a special meeting can be costly may be moot. When shareholders have a good reason to call a special meeting, our board of directors should be able to take positive responding action to make such a special meeting unnecessary. Special meetings allow shareholders to vote on important matters, such as electing new directors that can rise between annual meetings.
Calling a special meeting is a way to refresh the board of directors. For instance, Mr. Kong was rejected by 23% of shareholders at the 2019 annual meeting, and Mr. Kong still chairs the Executive Pay Committee. Another member of the Executive Pay Committee, Jean-Luc Bélingard, was rejected by 7% of shares. Kerrii B. Anderson, who still chairs the Audit Committee, was rejected by 8% of shares. By contrast, two other directors were rejected by less than 1% of shares. Management has only one sentence in response after the conclusion of this proposal. Please vote yes. Shareholder right to call a special meeting, proposal four
Thank you, Mr. Chevedden. The shareholder's proposal seeks the power for shareholders of 10% or more of our common stock to call a special shareholder meeting. The board has carefully considered the shareholder's proposal, and as described in our proxy statement, recommends a vote against this proposal for the following reasons. First, the board believes that the current threshold, which provides shareholders who have owned at least an aggregate of 25% of the company's voting stock continuously for one year with the right to call a special meeting, is appropriate. The 25% threshold strikes the appropriate balance between allowing shareholders to vote on important matters that arise between annual meetings and protecting against the risk of disruption by a relatively small minority of shareholders, shareholder activists, or special interest groups with self-serving agendas that are not in the long-term best interest of the company and all of its shareholders.
Second, the current 25% threshold complements the company's already existing right to act by written consent on the same matters that could be otherwise brought at annual or special meetings. In addition, considering the company's corporate governance policies and procedures, which meet a high standard, and its active shareholder engagement program, the Board believes the shareholder proposal is unnecessary.
The shareholder has moved for the approval of the shareholder proposal. The meeting is open for discussion relating to the shareholder proposal. If any shareholder would like to make a comment regarding this proposal, please submit your comment through the web portal or by email now. There are no questions or comments that have been received. I declare the polls shall now be open for voting. Any shareholders who have not yet voted or wish to change their vote may do so by clicking on the voting button on the web portal and following the instructions. Shareholders who have sent in proxies or voted via telephone or internet and do not want to change their votes do not need to take any further action. We will pause for a moment for any final voting. Thank you. The polls shall now be closed for voting.
We will pause another moment while the Inspector of Election tabulates the results of the vote.
I'm told that the Inspector of Election has completed the count of the votes and has reported the preliminary results to the Secretary. Will the Secretary please present the preliminary report of the Inspector of Election?
The Inspector of Election has reported to me that of the shares of Labcorp common stock outstanding on the record date and represented at the meeting, at least 91% of the shares voted have voted for the election of each of the nominated directors. At least 88% of the shares represented and entitled to vote have voted to approve the company's executive compensation. At least 95% of the shares represented and entitled to vote have voted for the ratification of the appointment of independent accountants for 2020. Regarding the shareholder's proposal, at least 53% of the shares voted have voted in favor of the shareholder proposal.
Accordingly, the motions for the election of the nominated directors, the approval of the company's executive compensation, the ratification of the appointment of independent accountants for 2020, and the shareholder proposal seeking the power for shareholders of 10% or more of our common stock to call a special shareholders meeting have passed.
Thank you, Ms. van der Vaart. The Secretary will file the final report of the Inspector of Election, including the final and complete tally of the votes with the records of the meeting in the record books of the company. This concludes the formal business of the meeting, and I hereby declare the meeting to be adjourned. Thank you for participating and for supporting the company.
We will now take general questions and answers. As a reminder, only validated shareholders will be able to ask questions using the designated field on the web portal or through our Investor Relations email address at investor@labcorp.com. If you choose to submit a question by email, please include your control number in the email subject line in order for your question to be considered. As a reminder, this question and answer session is being webcast live this morning. In addition, remarks made today may contain forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or other factors. We will now take questions.
Okay, the first question we received is how many employee furloughs so far in 2020? As we mentioned earlier this year, due to the pandemic from COVID-19, we had a significant reduction in the volume of our diagnostic testing outside of COVID-19, and we also saw some impact to our Drug Development business. Therefore, we looked at furloughs as well as reduced hours and several other items. To date, we've only done several hundred furloughs, and we continue to work with our employees to find out where the capacity can be reduced and where we have to maintain our current capacity. The second question is: What percent of employees can work mostly from home?
We are working with employees around the world to find ways that they can work from home where appropriate. Obviously, if people are working in our laboratories or performing tests each and every day, we need them to be in the laboratories. For many of our other functions, such as our corporate functions and other HR and IT and call centers, we've been able to have a very significant number of our employees work from home, and we'll continue to work with employees around the world to encourage, where appropriate, people to work from home, particularly as we continue to go through this pandemic. The next question is, are stock buybacks authorized for 2020? How much? At our meeting last week, where we announced our quarterly earnings for the first quarter of this year, we also announced that our share buyback program is suspended for the time being.
At this moment, we are not buying back shares. We'll continue to evaluate that as we move through the rest of the year. The next question is, in what month will the next in-person board meeting be? We continue to have discussions with our Lead Director and all of our directors to determine when it would be appropriate for us to meet as a team in person. Up through now, we've been holding our meetings virtually through using technology, and we will continue to do so until such a time where either states where we hold the meeting open up and allow us to meet in person. Under all circumstances, we will follow CDC guidelines to ensure that we have the appropriate things in place, including social distancing and using technology as much as possible at our meetings.
The next question is, does management expect more derivative suits like the one filed by shareholder Raymond Eugenio? I'd ask our Chief Legal Counsel, Sandra van der Vaart, to answer that.
This shareholder derivative lawsuit filed by Mr. Eugenio will be vigorously defended. The company has strong corporate governance and enterprise risk management to manage legal and other risk. Having said that, as a large publicly traded company, litigation is something that we have to face, and we cannot predict when and what litigation might be filed against us.
The next question is, the board have accepted that all employees in Labcorp and Covance had to take a pay cut due to expected impact of COVID-19 on the business. Can it be assumed that the same will be true for executive compensation? What we announced at our last analyst meeting for the quarterly analyst call was that we were looking at furloughs as well as decreased hours, that we suspended the 401 matching program. We did not announce any pay cuts. Obviously, we also announced that there would be no merit increases for this year. All the announcements are for all employees where appropriate. There are certain countries where there are work councils and unions and so forth, where there are exceptions. In general, the announcements were made for all employees, including executives.
We have an additional question submitted through our investor relations email. Last year, workers at Covance's facility in Alice, Texas, failed to provide food to 25 macaques for a period of six days. Monkeys imported by Covance are warehoused at the Alice facility before being shipped to laboratories across the U.S. The lack of food caused such poor body condition in two of the six monkeys that they had to be euthanized. Covance was cited for a critical violation of the Animal Welfare Act, which is the most severe type that can be assigned by a U.S. Department of Agriculture inspector. The incident described occurred before the Alice facility was acquired by Envigo. In 2019, at Covance's facility in Madison, Wisconsin, workers failed to handle monkeys in a humane manner, resulting in serious orthopedic injuries in two monkeys.
These injuries would have caused considerable pain and distress to the monkeys, who were euthanized. The company was issued a critical violation of the Animal Welfare Act for the incident as well. In 2018, at Covance's facility in Greenfield, Indiana, a rat mother and 11 pups were found to be without a feeder. Two of the pups had died, and the surviving nine pups were cold to the touch and thin. The mother rat was observed to have piloerection, suggesting that she was also cold and in shock. She was thin, suffered with alopecia or extensive hair loss, and had a hunched posture suggesting pain. The problem had not been identified during several daily health checks. The mother rat and the surviving pups were all euthanized. In a separate incident, also at the Greenfield facility, 19 rats were found without feeders. These animals were removed from the study and euthanized.
Covance's failure to comply with minimal animal welfare regulations and guidelines, the requirement that animals be given food, that animals be handled in a sufficiently humane manner, that they don't suffer broken or dislocated bones at three different facilities suggests that problems of this Labcorp subsidiary are systematic in nature. Our company acknowledges that failure to comply with animal welfare regulations and guidelines could harm the company's reputation and business, jeopardizing the value of the company's stock price. What is Labcorp doing to ensure that Covance will comply with federal animal welfare regulations and guidelines in the future?
Labcorp takes very seriously our ethical and regulatory responsibilities to treat research animals with the utmost care and respect. In addition to being the right thing to do, the proper care of research animals is fundamental to sound scientific research and the ability to develop safe and effective new medicines that save the lives of people and animals. There are clear links between excellent animal welfare, great science, and medical success. Covance has a sound compliance record and has made significant contributions to the development of life-saving and life-enhancing new medicines for cancer, deadly infections, heart disease, leukemia, diabetes, Alzheimer's, and many other disabling diseases. We will continue to do this as appropriate moving forward.
The next question is, "What percent of employees can work mostly from home?" As I mentioned earlier, that we are working very closely to ensure that any employee that can work from home has the ability to work from home. Obviously, if people are working in our laboratories or are working in areas that they need to be in the office, we're taking the appropriate precautions. At the same time, people in our call centers, in our corporate offices, in many areas like human resources and IT, have the ability to work from home, and we're encouraging each employee to have a discussion with their manager where they believe they can effectively work from home. Seeing no further questions at this time, we thank you again for your attendance at this morning's annual meeting of shareholders and for your continued support of Labcorp. Have a great day.
Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.