Ahead of their first shareholder conferences as public corporations, Airbnb Inc. and DoorDash Inc. are being known as out for his or her company governance constructions and high executives’ wealthy paydays.
Influential proxy-advisory corporations Institutional Shareholder Services, or ISS, and Glass Lewis & Co. are recommending shareholders withhold their board votes from Airbnb
Chairman and Chief Executive Brian Chesky and DoorDash
Chairman and CEO Tony Xu due to their compensation and the management they wield over the businesses they co-founded, in addition to different corporate-governance points. Both corporations went public final yr, and each executives obtained big inventory bonuses on the time of their preliminary public choices.
In quick, the company governance constructions Chesky and Xu arrange made them billionaires and gave them vital management over their corporations for the foreseeable future, and shareholder watchdogs are sounding the alarm.
Xu holds greater than 70% of the voting energy in DoorDash due to the supply platform supplier’s dual-class share construction and an settlement with co-founders Andy Fang and Stanley Tang that provides him voting authority over their shares. In addition, shareholders are set to vote on a mega-grant to Xu that might worth IPO inventory grants price $413 million at greater than $1 billion, Glass Lewis identified. That $413 million award made Xu the highest-paid CEO within the Bay Area in 2020, in response to the San Francisco Business Times.
When reached for remark, a DoorDash spokeswoman mentioned Thursday, “The performance award is entirely forward-looking, and paid only if Tony and DoorDash meet a series of increasingly ambitious performance goals, significantly outperforming the market and achieving a 5x return over the next seven years.”
Similarly, Glass Lewis famous that lodging-booking platform Airbnb’s $120 million inventory grant to Chesky skyrocketed to a possible worth of $1.67 billion after the corporate’s IPO.
“The quantum of this award warrants scrutiny, and shareholders should note that the company’s stock price has exceeded expectations,” Glass Lewis mentioned in a “controversy alert” Thursday. ISS mentioned in its proxy analysis report about Airbnb: “The CEO’s large front-loaded equity award intended to cover a 10-year period raises significant concerns.”
Glass Lewis additionally talked about that Airbnb “has clearly disclosed that this grant is intended to be Mr. Chesky’s sole form of incentive compensation for the 10-year term of the award, in addition to a $1.00 base salary.” But it additionally mentioned shareholders ought to “closely monitor” pay preparations going ahead.
In its proxy analysis report about DoorDash, ISS additional mentioned it opposes the election of all administrators who voted for provisions that give the corporate’s shareholders little energy. But as a result of the corporate has a labeled board construction, solely Xu is up for re-election. Therefore, ISS recommends a no vote towards him.
A vote towards Xu is “warranted given the board’s failure to remove, or subject
to a reasonable sunset requirement, the dual-class capital structure and the classified board structure, each of which adversely impacts shareholder rights,” ISS mentioned in its report. Its advice comes after CtW Investment Group final month filed a discover of exempt solicitation urging shareholders to vote towards Xu for a similar causes.
“In view of growing competitive and regulatory risks to its business model, it is imperative that DoorDash shareholders use what voice they have to send a clear message to the company,” wrote Dieter Waizenegger, government director of CtW, within the exempt solicitation letter. CtW works with union-sponsored pension funds which are “substantial” shareholders within the firm, the letter mentioned.
DoorDash’s enterprise mannequin depends on utilizing supply staff it considers impartial contractors as an alternative of workers, a mannequin that CtW says is “increasingly under fire” within the U.S. and Europe.
CtW is below no phantasm that it will probably make vital change at DoorDash, at the least for now.
“It’s certainly not possible for us to win a vote at DoorDash that would undo the structure,” Richard Clayton, analysis director at CtW, advised MarketWatch on Thursday. “But drawing attention to the unfairness and to the risks is something we can do.”
Pointing out the problems may result in regulatory or legislative adjustments, he mentioned, mentioning that, for instance, corporations with dual-class constructions are actually ineligible for itemizing within the S&P 500 and different main indexes
Both Glass Lewis and ISS additionally suggest shareholders withhold votes from Airbnb administrators Kenneth Chenault and Angela Ahrendts, “given the board’s failure to remove, or subject to a reasonable sunset requirement, the multi-class capital structure, the classified board, and the supermajority-vote requirement to enact certain changes to the governing documents, each of which adversely impacts shareholder rights.” Chenault and Ahrendts had been on the corporate’s board earlier than its IPO.
Both advisory corporations additionally identified different points they mentioned shareholders needs to be involved about. They say DoorDash has not offered sufficient disclosure in regards to the board’s oversight of environmental and social danger, with Glass Lewis saying that starting in 2022 it’s going to suggest that shareholders withhold votes from the chair of the committee accountable.
DoorDash and Airbnb have additionally not given enough disclosure about their board variety insurance policies and concerns, Glass Lewis mentioned.
Airbnb’s multi-class inventory construction, which provides Chesky and co-founders Nate Blecharczyk and Joe Gebbia 46.7% of complete voting energy, does have a time restrict. But ISS mentioned that “while the multi-class structure is subject to a time-based sunset, the 20-year time frame is not considered to be reasonable. As such, withhold votes are warranted on all director nominees.”
The two San Francisco-based corporations are each scheduled to carry their annual normal conferences June 22.
Airbnb had not returned a request for remark on the time of publication.