Yelp 2021 annual meeting is June 3, 9:30 AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit here. To participate, you need the 16-digit control number provided on your proxy card or voting instruction form. Of course, I recommend voting in advance. To enhance long-term value. Vote AGAINST Hu, Wells, Auditor, and Pay. Vote FOR Transition to a Public Benefit Corporation.
Yelp Inc. operates a platform that connects consumers with local businesses in the United States and abroad. The company’s platform covers local business categories, from restaurants to financial services. Most shareholders do not vote. Reading through 95+ pages of the proxy takes time but your vote could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 25 years and trust my judgment, skip 7 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 29% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
Yelp Systems 2021: ISS Ratings
Yelp Inc.’s ISS Governance QualityScore as of April 30, 2021, is 3. The pillar scores are Audit: 1; Board: 1; Shareholder Rights: 5; Compensation: 6.
Yelp 2021: Board Proposals
1. Directors
Egan-Jones Proxy Services recommends against Directors who served longer than 10 years since they are no longer considered not independent. Tony Wells falls into that category. They also recommend voting against members of the compensation committee when voting against pay. Since I voted against pay (see below), I voted against all the compensation committee members up for election: George Hu, and Tony Wells. Notice that Wells fits in both categories.
Vote: AGAINST Hu and Wells.
2. Ratification of Independent Auditor
I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Deloitte and Touche served more than seven years. No other issues appear significant
Vote: AGAINST
3. Executive Compensation
Yelp Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Jeremy Stoppelman at $7.96M. I’m using Yahoo! Finance to determine market cap ($2.976B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Yelp is a mid-cap company.
According to MyLogIQ, the median CEO compensation at mid-cap corporations was $6.4 M in 2020. CEO Jeremy Stoppelman at $7.96M is above that amount. Yelp shares underperformed mid-caps over the most recent one- and two-year time periods and five-year periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 86 to 1.
I agree with Calvert and NYC Pensions. (see below: Yelp 2021 CorpGov Recommendations) CEO pay is not adequately correlated with shareholder return. Additionally, Pay was above median.
Given my concern for the growing wealth disparity, I voted Against Pay and compensation committee members.
Vote: AGAINST.
Yelp 2021: Shareholder Proposals
4. Transition to Public Benefit Corporation
The proposal comes from me (James McRitchie), written by The Shareholder Commons.
The purpose of the Proposal is to better address the inevitable tension between shareholder interests and stakeholder concerns. The Proposal’s suggested resolution—conversion to a benefit corporation—is celebrated by Leo Strine, the former Chief Justice of Delaware. Chief Justice Strine argues conversion to benefit corporation status resolves the contradiction between company-first shareholder primacy and the need to account for the full impact of business operations:
So how to resolve this legal impasse? A recent innovation offers a sensible answer. … [The benefit corporation] puts legal force behind the idea that a business should have a positive purpose, commit to do no harm, seek sustainable wealth creation, and treat all its stakeholders with equal respect.
Yelp’s opposition statement fails to consider the gap between what it can do to address stakeholder interests as a conventional corporation and what it could do as a PBC.
Most Yelp shareholders are diversified investors who depend on an economy that succeeds for everyone over the long term. As a PBC, Yelp could better consider the long-term risks to multiple stakeholders and the overall economy, as well as to our Company. Yelp would be incentivized to protect you as a diversified shareholder by limiting activities that undermine healthy systems necessary for a successful economy. These social and environmental costs on the economy are not insignificant. At $2.2 trillion a year, they equal more than 2.5% of global GDP. While Yelp may increase its isolated return to shareholders slightly by applying a company-first shareholder primacy model, its diversified shareholders will pay for the costs it externalizes.
As a PBC, Yelp would have a clear advantage with regard to its customers. Investing with Yelp would be like hiring a reviewer or screener who owes you a fiduciary duty instead of one more concerned with how much they profit from you.
Vote: FOR
Yelp 2021 CorpGov Recommendations
Proxy Insight reported no votes when I last checked.
I looked up a few funds in our Shareowner Action Handbook. Calvert voted Against our PBC shareholder proposal and the Pay item.
The potential benefits and risks for companies to become public benefit corporations are largely untested.
CEO pay exceeds the 75th percentile of peers and the company’s performance is below the 75th percentile of the peer group. A vote AGAINST this proposal is warranted. The CEO receives a $1 base salary and there is no STI program. Although LTI awards are now at least half performance-based, the performance shares utilize one-year goals. Further, although the initially granted performance shares were entirely forfeited due to the negative impact of the pandemic, the earnouts from the additional mid-year performance shares exceeded the initially granted target number of shares, effectively resulting in above-target earnouts. Such additional LTI awards are generally not viewed as an appropriate reaction to the COVID-19 pandemic by many investors that generally expect annual-cycle LTI awards be based on multi-year rigorous goals.
NYC Pensions vote Against Gibbs, Hu, Pay, and PBC. Norges voted For all items.
- Directors: AGAINST Hu and Wells.
- Auditor: AGAINST
- Executive Pay: AGAINST
- Shareholder Proposal Transition to Public Benefit Corp: FOR
Yelp 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- Written consent not provided
- Proxy access rights missing
- Supermajority requirements to change bylaws
Yelp 2022: Mark Your Calendar
For inclusion in 2022 proxy materials, submit shareholder proposals, in writing, by December 24, 2021, to our Corporate Secretary at 140 New Montgomery Street, 9th Floor, San Francisco, California 94105.
Related Posts
Warnings
Be sure to vote for each item on the proxy. Any items left blank get automatically voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.
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