The company went public with an IPO in 2015. At that time, its corporate governance structure was quite poor…Alarm has a classified board…It also uses the plurality method of electing directors…The company does not allow shareholders to call a special meeting, nor does it allow shareholders the right of proxy access to nominate directors for election to the board.
In response to our questions on whether any changes were under consideration to improve the corporate governance structure, the company said that the financial and stock performance of the company has been good. As such, it didn’t think it needed to make any changes…One concern is that the chair, Tim McAdam, is a general partner of Technology Crossover Ventures, which is still the company’s largest shareholder. However, Technology Crossover Ventures has been selling down its stake. We asked the company how long it was appropriate for Tim McAdam to remain as chair and whether there was a succession plan in place. The company could not make any comment on the issues we raised.
While noting the company has performed well both financially and in terms of share price appreciation, we encouraged it to continue to make improvements to its corporate governance structure. We also noted that the company’s market capitalization has increased over three-fold since the IPO. As such, we do not think its current governance structure is appropriate for a company of its size.