Callouts & quotes from 287+ activist slides

"[T]he outsiders (who often had complicated balance sheets, active acquisition programs, and high debt levels) believed the key to long-term value creation was to optimize free cash flow, and this emphasis on cash informed all aspects of how they ran their companies – from the way they paid for acquisitions and managed their balance sheets to their accounting policies and compensation systems."

"Mr. Prittie’s alleged shortcomings were tied to his perceived failure to come to grips with Tyler and OneMove’s concerns over the Company’s financial status, share price performance, leadership, strategic vision and strategy, corporate governance, CEO compensation, excessive M&A activity, debt leverage to cash flow ratios and the lack of guardrails around senior management decision making."

"Spruce Point believes that Dropbox overstates free cash flow with a simplistic presentation that is analytically flawed and ignores two material costs such as: 1) Costs required to repurchase shares related to employee compensation programs, which are operating in nature, and 2) Costs associated to pay for infrastructure, which are effectively deferred capital expenditure payments."

"Considering that Zillow's Adj. EBITDA is virtually all stock-based compensation, Spruce Point believes free cash flow is a much better figure to value the Company. Zillow trades at a much higher multiple of free cash flow then nearly all its peers. At over 6x sales and ~37x+ FCF, we believe that Zillow is one of the most richly valued stocks among its peer group."

"We are not surprised to see a significant decline of insider ownership since the IPO. We have found management’s interests are aligned with its compensation and achieving performance targets rather than long-term, sustained share price appreciation. PBH’s “private equity” like acquisition strategy appears built for an exit and not long-term sustained growth."

"Not all percentages are created equal. The illustrative example below demonstrates why the top 1% of Herbalife’s distributors generate 88% of Recruiting Rewards, and why Herbalife’s compensation plan incentivizes distributors to recruit dramatically more so than other MLMs (there is a greater reward if you can get to the top)"

"Based upon Herbalife's own internal documents, Herbalife does not calculate China Sales Employees (a/k/a China royalties) based upon "Hourly Consulting Fees." Instead, Herbalife calculates royalty compensation in China as percentages of Retail Sales . . . just as Herbalife calculates royalty overrides in the rest of the world"

"Two of the incumbent nominees oversaw the substantial value destruction that we believe occurred at BOTH Red Lobster and Smokey Bones, and three were on the Compensation Committee that, as described later, put into place an incentive structure we believe that encouraged excessive spending as the answer to every problem"

"Two of the incumbent nominees oversaw the substantial value destruction that we believe occurred at BOTH Red Lobster and Smokey Bones, and three were on the Compensation Committee that, as described later, put into place an incentive structure we believe that encouraged excessive spending as the answer to every problem"

"As we discussed in our investor presentation, we believe this poor capital allocation was the direct result of poor corporate governance at the Board level, including shareholder-unfriendly compensation practices that incentivized management to pursue growth at the expense of returns on capital and shareholder value."

"Optically, PGNY would like investors to believe that it is achieving significant operating leverage. In reality, the largest contributor to its operating leverage story has been its aggressive use of stock-based compensation (SBC). Netting out the benefit of SBC uncovers that PGNY’s EBITDA margins are in decline."

"This survey data supports the thesis that if compensation cooperation requirements were eliminated and home-buyers had to compensate their agents directly, a significant population of home-buyers would try to negotiate commissions, seek agents with lower fees, or even try to purchase a home without an agent."

"Herbalife's entire business model appears to incentivize primarily the payment of compensation that is ‘facially unrelated to the sale of the product to the ultimate users because it is paid based on the suggested retail price of the amount ordered from [HLF], rather than based on actual sales to consumers.’"

"Although NICE is larger than Verint on most metrics (revenue, EBITDA, EBIT) and more efficient (revenue per employee, EBIT per employee), average compensation per insider at Verint is over 3x that at NICE, and Verint insiders take home a far greater percentage of EBIT in compensation than do NICE insiders."

"Poor Controls over Equity Grants: That the board did not become aware until several years after the fact that multiple grants to the CEO were in violation of the Company's incentive plans indicates that it did not have adequate controls in place to monitor the Company's executive compensation practices."

"There are still several current directors and members of management who oversaw and approved some of Disney’s worst corporate governance and strategic failures, including overpaying for the Fox acquisition, the expanding streaming losses, and “over-the-top” compensation packages granted to Bob Iger"

"BR management has consistently touted Closed Sales as a key performance indicator (KPI), and it influences management's short-term cash compensation. But as we'll illustrate, it is fraught with holes and should not be relied upon as a firm measure of revenue that will materialize in the near-term."

"Low compensation levels as indicated by Carvana’s filings is confirmed by employee reviews posted online: it appears that management is trying to attract talent without offering attractive compensation by creating a “fun” startup-like culture and hiring young people with low salary expectations."

"Management has collected ~$35 million dollars in performance compensation, growing at an 11% CAGR vs. organic growth CAGR of ~1%, tied to revenue and EBITDA targets while PBH has missed organic growth estimates for 4 out of 5 years and missed FCF guidance in 3 out of 5 years between 2015 – 2019."

"Seemingly unlike iRhythm’s Board, we do not believe the same management team that resided over a systematically flawed quality and compliance system should receive extra incentive compensation just to remediate their shortcomings, obey basic medical device laws, and cease endangering patients."

"With Sumner Redstone Absent for the Last Few Years, and With Dauman Effectively in Control of his Trust, it’s Been a Perfect Setup for Dauman and Dooley to Keep Paying Themselves Enormous Cash Compensation at the Expense of Shareholders With Weak Accountability in Terms of Their Performance"

"In August 2022, Zillow positioned the higher stock-based compensation as a one-time/off-cycle “retention action”. However, we believe Zillow has few options but to continue to grow stock-based compensation as it now makes up a significant piece of its employee compensation structure."

"It seems to us as if the Compensation Committee (having no Fortress Directors) waited until after the resignation of the Fortress Directors to disclose that it did not use any of information the compensation consultant provided to benchmark Andy Smith’s compensation as incoming CEO"

"This has resulted in executive compensation at AOL that is approximately 3.4 times the median compensation of an appropriate peer group that fits within the guidelines recommended by both ISS and Glass Lewis, despite poor absolute and relative stock price and financial performance."

"As Chair of the Compensation committee for each of the last 3 years, Glass Lewis has recommended that shareholders vote AGAINST Ms. Evans' continued service on the Board of Office Depot and has questioned whether she should even serve on any other public company board."

"BLK voting actions imply that it is in the best interest of their clients for a company to not pursue compensation for damages against former executives sentenced to jail (at the time of voting, on first degree judgement) for false accounting and market manipulation"

"BLK voting actions imply that it is in the best interest of their clients for a company to not pursue compensation for damages against former executives sentenced to jail (at the time of voting, on first degree judgement) for false accounting and market manipulation"

"We calculate that 35-50% of Adjusted Operating Income (EBIT) has gone to IRBT’s executive management in the past two years, whereas it was only 15% in 2011. We view this as a warning sign of executive compensation becoming disconnected from operating performance."

"We take issue with numerous governance decisions currently in effect at Zillow. One of our biggest concerns is that Zillow has not established a formal incentive program that outlines financial targets or thresholds that play a role in management’s compensation."

"It is concerning that Limbach removed working capital targets from its incentive compensation plan targets after 2020, particularly given the Company's use of cost-to-cost accounting, where revenue and profit recognition are heavily tied to management estimates."

"Vivendi opportunistically used the 19 member cap in TIM's by-laws to allow its executives onto the Board, although a majority of other investors voted against this as well as objecting to using TIM's funds to pay for compensation for these additional directors"

"The 2009 actual expense for “China Sales Employees” (a/k/a “China Royalty Overrides”) of $79,082,000 matches the $79.1 million Herbalife later reported as its 2009 “compensation to China sales employees and service fees to China licensed business providers.”"

"In our view, the prospect of a much larger compensation package (more than double his previous package) created a strong financial incentive for Mr. Iger to pursue the Fox deal regardless of its prospects, creating a significant conflict of interest"

"Spruce Point believes that current market data services fail to account for significant cash liabilities tied to unpaid taxes, product recalls, and unfunded employee compensation plans. We believe debt is $3.4 billion more than data services report."

"In our view, the prospect of a much larger compensation package (more than double his previous package) created a strong financial incentive for Mr. Iger to pursue the Fox deal regardless of its prospects, creating a significant conflict of interest"

"Glass Lewis is "unconvinced that the proposed changes to the 2012 LTI plan will adequately link pay and performance" and that it "leads us to question how committed the compensation committee truly is to linking equity pay to corporate performance""

"We do note that the substantial shares OPMG issued for the sub-license is a blueprint that NQ seems to follow with its repeated prodigious issuances of shares for compensation and as consideration for its numerous (seemingly corrupt) acquisitions."

"Stop lowering the bar with targets such as negative free cash flow and a return on invested capital well below the Company’s estimated cost of capital – unconscionable targets that the Compensation Committee has approved the last two fiscal years"

"Despite all of our findings that indicate Stryker's business is under increasing financial stress from underlying fundamental challenges and more expensive and levered acquisitions, Stryker's management took home a record in compensation in 2021."

"Stop lowering the bar with targets such as negative free cash flow and a return on invested capital well below the Company's estimated cost of capital - unconscionable targets that the Compensation Committee has approved the last two fiscal years"

"On March 29, 2022, DY appointed Ms. Carmen Sabater to the Board and she serves on the Finance and Compensation committees. Her biography notes that she was the Controller of MasTec Inc. (NYSE: MTZ) from 1994 – 2000 and CFO through January 2002."

"We find subtle evidence of challenges faced, but not adequately disclosed, at Lightspeed. The Company reported negative stock compensation, and footnoted that it was related to cancelled options for departed employees in the R&D department."

"Management compensation is a significant percentage of EBITDA and has been immune to Kratos’ struggles and poor performance. Among small cap aerospace and defense contracting peers, Kratos’ management is excessively paid relative to EBITDA"

"With less than a third of long-term pay tied to business growth the new compensation scheme - aligned with K27's flawed targets - fails to link management incentives to long-term performance metrics essential for a successful turnaround."

"Limbach's stock-based compensation payments, which are at the high-end when compared to peers, coupled with warrant issuances and a public offering in 2021, have left Limbach's shares outstanding nearly 50% higher than they were in 2019."

"Our Analysis of Historical Compensation Indicates CTO Never Would Have Hit Its Threshold for Bonuses If It Had Included Recurring Capex in Its AFFO. Management Has Inflated Its $8 Million Performance Bonuses With Its Made-Up AFFO Metric"

"How does Mettler attract and retain the most talented employees when its stock compensation expense per employee is the lowest in its industry by a significant margin, and it appears to avoid granting equity to rank and file employees?"

"Adopt an improved equity compensation and incentive scheme based on clear and transparent KPIs that are disclosed to investors (e.g. ROE, ROIC, operating profit, operating profit margin, debt to EBITDA and/or total shareholder return)"

"Monster is dependent on keeping the perceived value of its equity high because it is the most aggressive issuer of stock-based compensation at 1.2% of revenue and almost ~$15,000 per employee among selected food and beverage peers."

"athena wants everyone to back out the stock compensation because it’s a “non-cash” expense. Yet, it pays out cash taxes as part of its stock compensation scheme. At $28 million, that’s more than the company’s entire free cash flow."

"We estimate that Zillow's Adj. EBITDA growth since 2017 is comprised entirely of stock-based compensation. Zillow adds back stock-based compensation to Adj. EBITDA as a non-cash cost but uses cash to repurchase stock from dilution."

"While Office Depot made some cosmetic changes to its 2012 compensation plan, from mostly solely time-vesting awards to the addition of performance based awards, the reality is that the Company did not address shareholder concerns."

"Spruce Point has identified previously undocumented financial errors in Axon’s employee compensation programs. This bolsters our confidence that management is not being transparent about the true state of its financial affairs."

"In our opinion, Porch gave a long-winded and non-sensical explanation, as to why it booked $33m as stock-based compensation expense when Lowe's sold a portion of its equity for $4.0 million ($0.25 per share) to CEO Ehrlichman."

"Incomes applicable to the individuals (or examples) depicted [are] not average. For average financial performance data, see the Statement of Average Gross Compensation of U.S. Supervisors at Herbalife.com and MyHerbalife.com."

"We believe a large driver of Zillow's recent push for repurchases (the Company has spent nearly $1.4 billion over the last two years) is to offset dilution from the Company's overly-indulgent stock-based compensation program."

"We believe that Tempus is extremely dependent on keeping the perceived value of its equity high because it is among the most aggressive issuers of stock-based compensation at 77% of revenue and 283% of operating cash flow."

"Dr. Kleinfeld’s compensation does not appear linked to shareholder returns and in 2015, much of the current board saw fit to gross up Dr. Kleinfeld’s compensation by 34% despite the fact that company shares declined by 37%"

"This bold statement contradicts what Porch told the SEC earlier that the transaction should be viewed as stock compensation. If Porch was not a party to the transaction, why is it recorded in Porch’s financial statements?"

"Signatories are permanently barred from promoting another MLM Program that does not have the compensation limitations now required of Herbalife... When presented with these facts how many distributors will actually sign?"