Following Uber Technologies’ initial public offering in 2019, we engaged with the company to share Vanguard’s approach to governance and discuss the Uber board’s perspective on topics including board diversity, compensation, and oversight of strategy across multiple business lines.
In our most recent dialogue, we echoed other shareholders’ concerns that the CEO’s significant retention award, with a one-year vesting period, was excessive and misaligned with the long-term interests of shareholders. The total compensation package included a new-hire restricted stock unit grant of $55 million, which was not aligned with performance metrics. The company thought the grant was warranted to compensate the CEO for options the executive left behind at a previous employer in order to accept the job at Uber. The company attributed the award to the challenges of attracting and retaining top talent in a highly competitive environment. When evaluating executive compensation plans, we look to see compensation aligned to relative total shareholder return that incorporates rigorous targets with a long-term (at least a three-year) performance period.
Ultimately, the Vanguard funds voted against the Say on Pay proposal this year. We expect the board to implement appropriate incentives to better align with shareholders’ long-term interests.
Although we expressed significant concerns about executive compensation, the company did take positive steps to improve its board. Two directors, who were considered “over boarded” by our director commitments policy, stepped down from their excess directorships. As Uber navigates its first year as a publicly listed company, we look forward to encouraging good governance practices through productive engagements in the future.