With so many shareholder meetings going on around the world, investors need to be able to identify the companies that require extra attention. Hidden amongst thousands of routine agenda items, every portfolio includes companies with ESG, oversight, and reputational risks that demand additional analysis before casting a vote.
Take Airbnb and DoorDash, the latest big tech firms to IPO. Like many of their peers, both companies sought to raise capital without giving up control, utilizing dual-class share structures that provide founders with disproportionate voting power relative to their economic stake. As a result, they’ve gone public with ownership structures that would seem more appropriate for private companies, raising concerns amongst shareholder rights advocates.
Disproportionate voting structures aren’t just a theoretical matter – each company raises additional governance concerns, and the lack of a one-share, one-vote standard will make it more difficult for shareholders to address them going forward. For example, Airbnb’s post-IPO Charter limits shareholders’ ability to unseat directors, via a classified board, a plurality vote standard for director elections, and a “for cause” requirement for removing directors. Meanwhile, DoorDash lacks explicit board oversight of environmental and social risks and does not include a number of best practice disclosures around board diversity.
Similarly, the discrepancy between economic ownership and voting power diminishes shareholders’ voice when it comes to say-on-pay proposals. It’s a particularly salient concern given that the CEOs of both companies have received massive front-loaded equity grants, now estimated to be worth over $1 billion each. Moreover, the structure of DoorDash CEO and founder Tony Xu’s award effectively reinforces the problem of disproportionate voting power by potentially delivering Mr. Xu even more Class B shares, each of which are entitled to 20 votes.
These divergences from best practice prompted CtW Investment Group to file an exempt solicitation urging DoorDash shareholders to vote against Mr. Xu’s reelection (he is the only nominee up at this year’s meeting, due to the classified board). The magnitude of potentially voting against a founding CEO, combined with the sheer range of associated concerns, means that assessing companies like DoorDash and Airbnb will take significantly more resources than the typical annual meeting. That makes it all the more important for investors to identify potentially problematic companies as early as possible, so they have time to consider the specific circumstances, engage where practicable, and ultimately make the appropriate vote decision.
Glass Lewis Controversy Alerts are designed to help highlight these types of issues. Controversy Alerts provide all the details necessary to understand the biggest controversies at a glance, giving more time to analyze and take action through voting and engagement. Succinct and actionable alerts, fully integrated into the Viewpoint voting and reporting platform, allow investors to sift through the haystack of daily vote decisions and identify material ESG and oversight concerns that require additional attention.
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