Prior to its first shareholder meetings as public companies, Airbnb Inc. and DoorDash Inc. are called because of their corporate governance structures and the rich salaries of top managers.
Influential proxy consulting firms Institutional Shareholder Services or ISS and Glass Lewis & Co. recommend that shareholders retain their votes on board from Airbnb ABNB,
Chairman and CEO Brian Cesky and DoorDash DASH,
Chairman and CEO Tony Sue because of their compensation and the control they exercise over the co-founding companies, as well as other corporate governance issues. Both companies went public last year, and both managers received giant share bonuses during their initial public offerings.
In short, the corporate governance structures created by Cesky and Sue have made them billionaires and given them significant control over their companies for the foreseeable future, and shareholder supervisors are sounding the alarm.
Xu owns more than 70% of the voting rights in DoorDash due to the dual structure of the delivery platform supplier and the agreement with co-founders Andy Fang and Stanley Tang, which gives him the right to vote on their shares. In addition, shareholders must vote for a mega-grant for Xu, which could value the $ 41
When reached for comment, a DoorDash spokesman said Thursday, “The performance award is entirely future-oriented and will only be paid if Tony and DoorDash meet a series of increasingly ambitious performance goals, significantly outperforming the market and achieving a 5-fold return. over the next seven years. “
Similarly, Glass Lewis noted that the $ 120 million grant for Airbnb’s booking for the Czech Republic jumped to a potential value of $ 1.67 billion after the company’s IPO.
“The quantum of this award requires control, and shareholders should note that the company’s share price has exceeded expectations,” Glass Lewis said in a “warning of controversy” on Thursday. ISS said in its proxy research report for Airbnb: “The Grand Prize for front-end stocks, designed to cover a 10-year period, raises serious concerns.”
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Glass Lewis also mentioned that Airbnb “made it clear that this subsidy was intended to be the only form of incentive compensation for Mr. Cesky for the 10-year term of the award, in addition to the basic salary of $ 1.00.” But it is also said that shareholders must “closely monitor” future payment arrangements.
In its research report for DoorDash, ISS also said it opposed the election of all directors who voted for regulations that give the company’s shareholders little power. But since the company has a classified board structure, only Xu is for re-election. The ISS therefore recommends that no vote be taken against it.
The vote against Xu was “justified by the board’s inability to remove either subject
a reasonable sunset requirement, the dual class capital structure and the classified board structure, each of which adversely affects shareholders’ rights, ”the ISS report said. His recommendation comes after CtW Investment Group filed a notice of release last month, urging shareholders to vote against Xu for the same reasons.
“In view of the 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,” Dieter Weisenegger, CEO of CtW, wrote in the released invitation letter. CtW is working with union-sponsored pension funds, which are “significant” shareholders in the company, the letter said.
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DoorDash’s business model relies on the use of suppliers it sees as independent contractors instead of 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’s certainly not possible to win a vote in DoorDash that would undo the structure,” Richard Clayton, director of research at CtW, told MarketWatch on Thursday. “But focusing on injustice and risk is something we can do.”
Pointing out that problems could lead to regulatory or legislative changes, he said, mentioning that, for example, companies with dual class structures no longer qualify for inclusion in the S&P 500 and other major SPX indices,
Both Glass Lewis and ISS are urging shareholders to retain the votes of Airbnb CEOs Kenneth Chenault and Angela Arendts, “given the failure of the board to remove or comply with a reasonable sunset requirement, a multi-class capital structure, a classified board and over-majority requirements. voting to introduce certain changes in the management documents, each of which adversely affects the rights of shareholders. “Sheno and Arendz were on the company ‘s board before its IPO.
Both consulting firms pointed to other issues that shareholders believe should be of concern. They say DoorDash has not provided enough information on the board’s oversight of environmental and social risk, and Glass Lewis says that from 2022 he will recommend shareholders to refuse the votes of the chairman of the responsible committee.
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DoorDash and Airbnb have also not adequately disclosed their diversity policies and considerations on board, Glass Lewis said.
Airbnb’s multi-class share structure, which gives Chesky and co-founders Nate Blecharczyk and Joe Gebbia 46.7% of the total voting power, has a time limit. But the ISS said that “while the multi-class structure is subject to the setting of time, the 20-year time frame is not considered reasonable. As such, voice retention is justified for all nominees for director. ”
The two companies, based in San Francisco, are scheduled to hold their annual general meetings on June 22.
Airbnb had not returned a request for comment at the time of publication.
See: 5 things you need to know about DoorDash’s IPO
See: 5 things you need to know about Airbnb’s IPO