Block, Inc. (NYSE:SQ) Shareholder Analyst Call June 14, 2022 1:00 PM ET
Company Participants
Jack Dorsey – Block Head & Chairperson of the Board
Sivan Whiteley – Chief Legal Officer & Corporate Secretary
Natalie DeMuro – Investor Relations
Amrita Ahuja – Chief Financial Officer
Conference Call Participants
Nia Santiano – NorthStar Asset Management
Operator
Good morning, and welcome to Block Inc.’s 2022 Annual Meeting of Stockholders. Please note that this event is being webcast.
I would now like to introduce Jack Dorsey, the company’s Block Head and Chairperson of the Board. Mr. Dorsey, please go ahead.
Jack Dorsey
Welcome, everyone, and thank you all for joining our 2022 Annual Meeting of Stockholders. We are pleased to continue holding our annual stockholders’ meeting virtually, as we aim to enable broad access and participation.
I would now like to turn the meeting over to Sivan, our Chief Legal Officer and Corporate Secretary, who will lead the formal business of the meeting and also act as Secretary.
Sivan Whiteley
Thank you, Jack. First of all, I’d like to start by thanking our directors, David Viniar and Anna Patterson, who are not standing for reelection at this meeting for their distinguished service as members of our Board of Directors and wish them the best of luck on their future endeavors.
At this time, I’d now like to introduce the members of our Board of Directors who are participating in the meeting today. They are Roelof Botha, our Lead Independent Director, Amy Brooks, Shawn Carter, Paul Deighton, Randy Garutti, James McKelvey, Mary Meeker, Sharon Rothstein, Lawrence Summers and Darren Walker. We also have with us Amrita Ahuja, our Chief Financial Officer; and Dave Cabral of Ernst & Young, our independent registered public accounting firm. Mr. Cabral will be available to respond to appropriate questions during the Q&A session at the end of this meeting.
We have appointed Chris Vico [ph] to act as the inspector of election today. She has executed an oath of office to carry out her duties with strict impartiality and to the best of her ability and she will examine and tabulate the proxies and ballots at this meeting.
With introductions concluded, we’ll move on to other procedural matters. As an overview of today’s meeting, we will begin with the formal business portion, during which we will address the matters described in our 2022 proxy statement and vote on the proxy proposals. We will then announce preliminary voting results and adjourn the formal portion of this meeting. Afterward, we will provide time for a live Q&A session.
Stockholders of record and street name stockholders with a legal proxy from their broker, bank or other nominee may submit questions through the web portal during the formal business portion of the meeting, with a limit of one question per stockholder. We have allotted a certain amount of time after the formal business portion of the meeting to respond to the submitted questions.
We will only be able to answer questions submitted prior to the start of the question-and-answer portion of this meeting and only questions that are relevant to our business operations will be answered. Note that the meeting is being recorded and a webcast replay will be available on the same meeting website following today’s meeting.
Our Board of Directors has fixed April 21, 2022, as the record date for determining the stockholders entitled to vote at this meeting. I have an affidavit of distribution from Broadridge Financial Solutions confirming that proxy materials related to this meeting were mailed to stockholders of record determined as of the close of business on the record date starting on April 28, 2022.
A complete list of the stockholders entitled to vote at this meeting will be available online for the duration of the meeting and can be found on the virtual meeting web page. Ms. Vico reports that the holders of a majority of the combined voting power of our Class A and Class B common stock outstanding as of the record date, are present at the meeting, either virtually or by proxy, which constitutes a quorum. Therefore, today’s meeting is duly convened and open for business.
We will now proceed with the formal business of the meeting. The polls are open. If any stockholders have not yet voted or wish to change their vote, please click on the voting button in the web portal and follow the instructions. If you have already sent in a proxy or voted via the telephone or Internet and do not wish to change your vote, no further action is needed.
As a reminder, as described in our proxy statement, CDI holders cannot vote at this meeting. There are five proposals to be considered and voted upon by our stockholders. Each of these proposals is more fully described in our proxy statement filed with the Securities and Exchange Commission on April 28, 2022.
The first proposal is to elect two Class I directors. Jack Dorsey and Paul Deighton to serve until our 2025 Annual Meeting of Stockholders and until their successors are duly elected and qualified. No other director nominees have been properly submitted pursuant to our bylaws or the rules of the Securities and Exchange Commission, so no other nominations are being considered. Each of the two director nominees is currently serving on our Board, and our Board of Directors recommends a vote for all of these director nominees.
The second proposal is to approve on an advisory basis the compensation of our named executive officers. We currently hold this Say on Pay Vote every year. Our Board of Directors recommends a vote for the advisory approval of the compensation of our named executive officers and the adoption of the following resolution. It reads as follows; resolved that the stockholders approve on an advisory basis, the compensation paid to our named executive officers as disclosed in the proxy statement for the annual meeting pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, compensation tables and narrative discussion and other related disclosure.
The third proposal is to approve, on an advisory basis, the frequency of future stockholder advisory votes on the compensation of our named executive officers. Our Board of Directors recommends a vote to hold future stockholder advisory votes on the compensation of our named executive officers every one year.
The fourth proposal is to ratify the appointment of Ernst & Young as our Independent Registered Public Accounting firm for our fiscal year ending December 31, 2022. Our Board of Directors recommends a vote for the ratification of the appointment of Ernst & Young.
The fifth and final proposal is a stockholder proposal regarding a change in stockholder voting. By agreement with the proponent of this proposal, NorthStar Asset Management, Inc. Funded Pension Plan. The proponent is presenting this proposal by a prerecorded message. The statement and the message is the proponents owned and has not been reviewed for accuracy, edited or endorsed by Block.
We will now play their prerecorded message.
Nia Santiano
My name is Nia Santiano from NorthStar Asset Management in Boston, representing clients that own over 59,000 shares of Block common stock. I am presenting resolution number five, a request that Block’s Board take all practicable steps to initiate and adopt a recapitalization plan for all outstanding stock to have one vote per share.
Shareholder voting at each annual and special meeting is a vital tool that allows shareholders to weigh in on matters that may affect their investment in the company. The SEC calls proxy voting, the primary way for shareholders to make their views known to company management.
Unfortunately, Block’s voting structure is heavily weighted to favor insiders because Class B shares are granted 10 times the voting rights of Class A shares.
Given that insiders control so much of the vote without owning commensurate economic stake, it would take almost every outside shareholder to agree in order for any proposal to receive a majority vote if the insiders disagree.
This means that even if 75% or 80% of outside shareholders vote against a management proposal or for a shareholder proposal, the company can claim that not enough shareholders supported it to pass. Despite any voting action shareholders take their feedback to management is effectively weakened. The Council of Institutional Investors describes the situation as this, “Often over time, this founder-knows-best approach presents increasing risk to long-term investors by entrenching management and blindsiding executives to the need for change.”
As long-term shareholders, we are concerned by exactly these risks. For example, Block’s majority stake acquisition of the streaming service title founded alarm bells for us when news reports described the purchase as a deal between, Mr. Dorsey and it’s ”close personal friend” Jay-Z that was decided ”during a yacht cruise in the Hamptons”. Then more recently, the company’s re-branding to Block raised red flags when from our perspective, it appears that Mr. Dorsey’s personal passion for cryptocurrency may have obfuscated the risk of crypto and the questionable connection to the company’s mission.
Corporate governance experts and researchers increasingly tell us that multi-class voting structures are not ideal for shareholders and the long-term value of the company. Critics point to research showing that multi-class share structures face more governance challenges compared to other companies and may not outperform competitors as companies mature and of course, that managers are insulated from accountability. Shareholders, we urge you to vote for proxy item number five, a recapitalization plan for all outstanding stock to have one vote per share. Thank you.
Amrita Ahuja
Thank you, Ms. Santiano. Our Board of Directors recommends a vote against this stockholder proposal. The polls are still open. Voting today is by proxy and online ballot. As previously mentioned, if you already submitted a proxy or voted via the telephone or Internet and do not wish to change your vote, no further action is needed at this time.
If you have not yet voted or wish to change your vote, you may do so now by clicking on the voting button in the web portal and following the instructions. If you have not yet submitted a proxy or electronic ballot, you must submit your electronic ballot now for your vote to be counted by the inspector of election. We will leave the polls open for another minute to allow anyone who chooses to vote electronically to cast their ballots.
The polls are now closed. No additional ballots, proxies or votes and no changes or revocations will be accepted.
Based on our preliminary voting results, the stockholders have elected the two Class I Directors to serve until the 2025 Annual Meeting of Stockholders and until their successors are duly elected and qualified. Approved on an advisory basis, the compensation of our named executive officers; approved on an advisory basis that the frequency of future stockholder advisory votes on the compensation of our named Executive officers should be every one year; ratified the appointment of Ernst & Young as our independent registered public accounting firm for our fiscal year ending December 31st, 2022; and not approved the proposal regarding a change in stockholder voting.
The final voting results will be set forth in a report of the Inspector of Election and will be included in the minutes of this meeting. We will also report the final voting results on a Form 8-K, which we will file with the Securities and Exchange Commission within four business days of today’s date.
This concludes our planned agenda today. As there is no other formal business before us, I now declare the formal business portion of the meeting adjourned and the ability to submit further questions through the web portal is closed.
We will now answer stockholder questions received today through the web portal. Please note that only questions that are relevant to our business operations will be answered and there’s a limit of one question per stockholder. We will attempt to answers as many questions as time allows.
I’ll now turn it over to Natalie DeMuro from our Investor Relations team to oversee this Q&A session.
Natalie DeMuro
Thank you, Sivan. Before we begin, I would like to note that our responses to your questions today may include forward-looking statements. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please take a look at our filings with the Securities and Exchange Commission for a discussion of the factors that could cause our results to differ.
Also, note that any forward-looking statements are based on information available to us as of today’s date and we disclaim any obligation to update any forward-looking statements except as required by law.
Further, our responses may include discussion of certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in our shareholder letters for prior quarters and other filings with the Securities and Exchange Commission, all of which are available on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results.
Question-and-Answer Session
A – Natalie DeMuro
We will now pause for a moment to assemble the queue of questions. We will now take our first question, which is for our Chief Financial Officer, Amrita Ahuja.
We understand that the Board has no immediate plans to shift to a one-share-one-vote structure. In light of this, Go Block! commit to offering opportunities for deeper conversations with the full breadth of its institutional shareholder base, including the hosting and ESG investor discussion over the next year.
Amrita Ahuja
Thank you very much for the question. The Board believes our governance practices help the Board and management focus on creating value over the long-term and develop and execute Block’s strategic mission. Further, regular shareholder communication is a top priority for us.
We host quarterly earnings calls and meet with numerous shareholders every quarter. Last year, we met with a number of shareholders specifically on our ESG initiatives. We also recently held an Investor Day, where we provided an in-depth update to our shareholders on our business initiatives, product strategies, and financial outlook. We also had meetings with individual shareholders afterwards. We continue to welcome shareholder engagement on all topics, including on ESG matters.
Natalie DeMuro
We have no other questions. We will now conclude the question-and-answer period. For any questions we were unable to get to, please refer to our Investor Relations website at investors.block.xyz. Thank you again for joining us today.
Operator
Thank you for joining today’s meeting. You may now disconnect.
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