Mashable claims that “So perhaps it shouldn’t come as much of a surprise that GoPro would pay pretty much any amount of money to ensure that the CEO is happy and engaged.” Let’s take a look.
Woodman received 4.5 million restricted stock units worth $284.5 million as of the end of 2014, earning him the title of highest paid CEO in the U.S., according to the new Bloomberg Pay Index.
That sounds official and mathematical. Is it true?
Here is how that grant worked. Woodman got the grant in June 2014. GoPro did not hand him a $284.5 million wad of cash. It handed him shares as part of an employment contract, of which only 1.5 million were actually his at the time (still a lot, but not nearly what Mashable claimed). He can get the rest, but only if the stock price hits its targets and he continues working there. The price targets are $34.03/share and $44.24/share. That would be 42% and 84%, respectively, higher than the $24/share IPO price.
It was a rich deal for the founder and key employee of what became a very valuable company ($5.9 billion market cap as of this writing). Some people may refer to this “aligning management’s interests with those of the shareholders.” Nobody would honestly say he “makes $284 million a year.”
Shopify IPO documents outline corporate governance strategies with concentrating voting for insiders.
Shopify filed for an IPO. It is raising around $100 million (a placeholder figure), but it is too early to know exactly how much of the company this represents.
We do know that Shopify is implementing a dual share voting structure similar to many other tech companies. While corporate governance activist types decry these types of arrangements, even a Canadian company knows how to protect the voting rights of its insiders. Proponents say these structures allow for longer term thinking and innovation.
Currently, officers and directors control about 56.5% of the voting rights, with CEO Tobias Lutke holding 14.62%. The 56.5% number is skewed because this includes investor nominees to the board, including Bessemer Venture Partners (30.3%).
The voting rights will be split up between Class B shares with 10 votes per share and the publicly held Class A shares with 1 vote per share. The prospectus outlines the risk of concentrated voting. However, it is not really a risk. It is the point.
“In addition, because of the 10-to-1 voting ratio between our Class B multiple voting shares and Class A subordinate voting shares, the holders of our Class B multiple voting shares, collectively, will continue to control a majority of the combined voting power of our voting shares even where the Class B multiple voting shares represent a substantially reduced percentage of our total outstanding shares. The concentrated voting control of holders of our Class B multiple voting shares will limit the ability of our Class A subordinate voting shareholders to influence corporate matters for the foreseeable future.”
Posting has been scarce here and on Twitter. I am hoping to start up again soon. I’ve been busy, so there’s a lot to discuss. Law and technology have not taken a day off just because I don’t write about it here.