The short answer is this: It is a weasel move because the CEO has voting rights and almost 95% of the “not his vote” shareholders voted against it. And it is doubly weaselly because the repricing of options included him and his $700mm current stake at low stock levels, vs. a focus on the rank and file.
The Trade Desk Rescued Executives’ Stock Options from a Dive in the Share Price — WSJ
Proper compensation structure has three legs: retention, incentive,
But like all good things, you can have too much of a good thing. Stocks often move—both individually and en masse—for reasons that have nothing to do with the individual decision-making that leads to fundamental improvement. I have seen plenty of examples of compensation plans that look great on paper, only to have their alignment incentives blown out of the water by off-spreadsheet events or simply the whims of the stock market.
The Trade Desk’s stock is down a solid 80% for many reasons. There are some 3,800 employees who might have lost some selfish enthusiasm for the corporate mission as a result. It wouldn’t be “awful” for employees or shareholders if there were a structured giant redo for 3,750 of them—allowing them to exchange, say, 100 shares of out-of-the-money incentives for 40 new shares at a lower strike price, with interesting vesting schedules tied to fundamental metrics rather than just the stock price alone. Enacting a plan like this for “anyone but the CEO” would have been a proper compensation move.
A counter-argument is that it is almost a “fact” most employees don’t really care at all about the corporate mission or esprit de corps as expressed through the stock price; equity-oriented comp is merely a piggybank for most and is rarely held long-term. So asking “why bother at all?” is not a terrible question—and I have seen CEOs exasperated by why the rank and file just don’t see it that way. That is precisely why the farther down the corporate totem pole you go, the more incentive should be tied to tangible fundamental improvements that are visible and within reach.
As is often the case, there is a giant pattern of weaselhood at The Trade Desk, and this is just the latest installment. The original sin remains the CEO and his Class B voting stock, which enables him to tightly control corporate governance.Mr. Chief Weasel leads a company that has been public for ten years—arguably a proper length of time to sunset any founder’s special rights. He recently coerced a board—for the second time—into extending the sunset provision for his B-voting stock by 10 years to 2035. And he managed to “convince” the board of the need for a special “one-time” grant just for him.
While $700mm in low-cost stock barely gets you a yacht berth in St. Tropez in peak season, it suggests some incentive. The CEO should have a “plan,” but this is far from it.
To paraphrase: “In the absence of action by good board members, management will endeavor to take from shareholders.”
Take names. Board members recirculate like baseball managers.
