Prior to their first shareholder meetings as public companies, Airbnb Inc. and DoorDash Inc. are solicited for their corporate governance structures and the rich salaries of their executives.
Influential proxy advisory firms Institutional Shareholder Services, or ISS, and Glass Lewis & Co. recommend that shareholders not vote for Airbnb ABNB’s board of directors,
Chairman and CEO Brian Chesky and DoorDash DASH,
Chairman and CEO Tony Xu due to their compensation and control over the companies they co-founded, as well as other corporate governance matters. Both companies went public last year and both executives received bonuses from giant stocks when they went public.
Xu owns more than 70% of the voting rights in DoorDash due to the dual-class share structure of the delivery platform provider and an agreement with co-founders Andy Fang and Stanley Tang that gives him the right of voting on their shares. In addition, shareholders are expected to vote on a mega-grant to Xu that could value IPO stock grants worth $ 413 million to over $ 1 billion, said Glass Lewis. The $ 413 million award made Xu the highest-paid CEO in the Bay Area in 2020, according to the San Francisco Business Times.
When contacted for comment, a DoorDash spokesperson said Thursday: “The price for performance is fully forward-looking and only paid if Tony and DoorDash meet a growing set of performance goals. ambitious, significantly outperforming the market and achieving a 5x return over the next seven years. “
Likewise, Glass Lewis noted that the grant of $ 120 million shares of the Airbnb accommodation reservation platform to Chesky skyrocketed to a potential value of $ 1.67 billion after the IPO of the company.
“The amount of this award deserves careful consideration, and shareholders should note that the company’s stock price has exceeded expectations,” Glass Lewis said in a “controversy alert” Thursday. ISS said in its Airbnb proxy research report: “The large CEO stock award to cover a 10-year period raises significant concerns.
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Glass Lewis also mentioned that Airbnb “made it clear that this award is intended to be Mr. Chesky’s only form of incentive compensation for the 10-year term of the award, in addition to a base salary of $ 1. , 00 $ ”. But he also said shareholders should “closely monitor” compensation deals going forward.
In its proxy research report on DoorDash, ISS further said it opposed the election of all directors who voted for provisions that give little power to the company’s shareholders. But because the company has a classified board structure, only Xu is running for re-election. Therefore, ISS recommends a no against him.
A vote against Xu is “justified given that the board did not remove or submit
to a reasonable sunset requirement, the dual class capital structure and the classified board structure, each having a negative impact on shareholder rights, ”ISS said in its report. His recommendation comes after CtW Investment Group filed an exempt solicitation notice last month urging shareholders to vote against Xu for the same reasons.
“Given the growing competitive and regulatory risks to its business model, it is imperative that DoorDash shareholders use the voice they have to send a clear message to the company,” wrote Dieter Waizenegger, CtW chief executive, in the letter of solicitation provided. CtW works with union-sponsored pension funds that are “significant” shareholders of the company, according to the letter.
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DoorDash’s business model relies on the use of delivery people it sees as independent contractors rather than employees, a model that CtW says is “increasingly criticized” in the United States and Europe.
CtW has no illusions that it can make significant changes to DoorDash, at least for now.
“It is certainly not possible for us to win a vote at DoorDash that would cancel the structure,” Richard Clayton, research director at CtW, told MarketWatch on Thursday. “But calling attention to injustice and risk is something we can do. ”
Stressing that the problems could lead to regulatory or legislative changes, he said, noting that, for example, companies with dual-class structures are now not eligible for listing in the S&P 500 and others. major SPX indices,
Glass Lewis and ISS also recommend that shareholders not vote Airbnb directors Kenneth Chenault and Angela Ahrendts, “given that the board has not removed, or subject to a reasonable sunset requirement, the multiclass capital structure, the classified board of directors and the qualified majority. voting requirement to enact certain changes to the constating documents, each of which has a negative impact on the rights of shareholders. Chenault and Ahrendts were on the board of directors of the company before its IPO.
The two consultancies also highlighted other issues that they believe should be of concern to shareholders. They say DoorDash has not provided enough information on the board’s oversight of environmental and social risks, with Glass Lewis saying that from 2022 he will recommend shareholders not to vote on the chairman of the responsible committee.
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DoorDash and Airbnb also failed to adequately disclose the diversity policies and considerations of their boards, said Glass Lewis.
Airbnb’s multi-class share structure, which gives Chesky and co-founders Nate Blecharczyk and Joe Gebbia 46.7% of total voting rights, has a time limit. But ISS said that “although the multi-class structure is subject to a time-based sunset, the 20-year timeframe is not considered reasonable. As such, abstention from voting is justified for all candidates for director positions. ”
The two San Francisco-based companies are both scheduled to hold their annual general meetings on June 22.
Airbnb had not returned a request for comment at the time of posting.
See: 5 Things To Know About The DoorDash IPO
See: 5 things to know about Airbnb’s IPO