DEFA14A: Teladoc Health Urges Stockholders to Approve Executive Compensation and Incentive Award Plan

Teladoc Health is soliciting stockholder votes for the approval of executive compensation (Say-on-Pay Proposal) and an amendment to the 2023 Incentive Award Plan at the upcoming Annual Meeting on May 22, 2025.

Summary

• Teladoc Health is seeking stockholder approval for two key proposals at its Annual Meeting on May 22, 2025.
• The first proposal is an advisory vote on executive compensation (Say-on-Pay Proposal), which the Board unanimously recommends voting for.
• The second proposal is to approve an amendment to the company's 2023 Incentive Award Plan, which is crucial for attracting and retaining talent through equity awards.
• The Board believes that failing to approve the Incentive Award Plan Proposal would force the company to reduce equity compensation and potentially decrease long-term alignment with investors.
• Teladoc Health emphasizes that its compensation strategy, including equity compensation, is vital for competing with other healthcare and technology companies, especially in regions like Silicon Valley.
• In 2024, approximately 92% of the CEO's and 71% of other named executive officers' target total direct compensation consisted of equity compensation.
• The company manages stockholder dilution by limiting the number of equity awards granted annually.
• The company's run rate, defined as the number of equity awards granted divided by the weighted average shares of common stock outstanding, has decreased from 5.43% for 2022 to 4.56% for 2024.
• The CEO transition in 2024 led to a higher than expected run rate for 2024 because it effectively included multiple CEO grants.
• Without the award to Mr. Divita, the run rate in fiscal year 2024 would have been 3.74%.
• Total stock-based compensation expense has decreased from $217.9 million in 2022 to $146.0 million in 2024.
• The company expects the proposed share increase to last approximately one year.
• The Board highlights strong governance practices within the 2023 Incentive Award Plan, including minimum vesting conditions, no repricing without stockholder approval, and a clawback policy.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook regarding the company's compensation practices and the importance of the proposals for future growth and talent retention. While there are risks mentioned, the overall tone is optimistic and supportive of the company's strategies.

Positives

• The Board unanimously recommends voting FOR both the Say-on-Pay Proposal and the Incentive Award Plan Proposal.
• The company emphasizes the importance of equity compensation for attracting and retaining talent in a competitive market.
• Teladoc Health has a history of strong stockholder support for its compensation programs, including approximately 96% support at the 2024 annual meeting.
• The company manages stockholder dilution by limiting the number of equity awards granted annually.
• The company's run rate has decreased from 5.43% in 2022 to 4.56% in 2024.
• Total stock-based compensation expense has decreased from $217.9 million in 2022 to $146.0 million in 2024.
• The 2023 Incentive Award Plan incorporates favorable corporate governance practices, such as minimum vesting conditions and a clawback policy.

Negatives

• Failure to approve the Incentive Award Plan Proposal could force the company to reduce equity compensation and potentially decrease long-term alignment with investors.
• The CEO transition in 2024 led to a higher than expected run rate for 2024 because it effectively included multiple CEO grants.

Risks

• Changes in laws and regulations applicable to the business model could impact results.
• Changes in market conditions and receptivity to services and offerings, including the ability to effectively compete, could affect performance.
• The loss of one or more key clients or a significant number of members or BetterHelp paying users could negatively impact the company.
• Changes in valuations or useful lives of assets could affect financial condition.
• The company's ability to recruit and retain qualified providers into its network is a risk factor.
• Impairment losses with respect to goodwill or other assets could impact results.
• The success of the operational review to achieve a more balanced approach to growth and margin is a risk.
• Imposed and threatened tariffs by the United States and its trading partners, and any resulting disruptions or inefficiencies in the supply chain, could pose risks.

Future Outlook

The company expects the proposed share increase to last approximately one year and anticipates the run rate will decrease in subsequent years.

Management Comments

• Our Compensation Committee believes the support received from stockholders last year demonstrates that our stockholders strongly approve of our philosophy, strategy, objectives and implementation of our executive compensation programs.
• We believe that the ability, hard work and talent of our employees is a major reason for our leadership position in virtual care.
• We believe our equity usage strikes the correct balance between retaining employees in a very competitive industry and responsibly managing dilution levels, and we will continue to monitor our equity usage.

Industry Context

Teladoc Health competes for talent with other healthcare and technology companies, including those in Silicon Valley, where equity incentives are crucial for attracting and retaining employees. The company's peer group includes software and technology companies, some of which are much larger and can offer more competitive pay programs.

Comparison to Industry Standards

• Teladoc Health's compensation strategy is designed to be competitive with other healthcare and technology companies, particularly those in high-cost areas like Silicon Valley.
• The company benchmarks its executive compensation against a peer group of software and technology companies to ensure it can attract and retain top talent.
• The document highlights that equity compensation is a fundamental element of pay-for-performance, aligning employee interests with stockholder value, a common practice in the tech industry.

Corporate Governance

Stakeholder Impact

• Approval of the Incentive Award Plan Proposal is expected to positively impact employees by allowing the company to continue offering competitive compensation packages.
• Stockholders are expected to benefit from the alignment of employee and executive interests with long-term value creation.
• The company's ability to attract and retain talent is crucial for maintaining its leadership position in the virtual care market, which benefits customers through continued innovation and service quality.

Next Steps

• Stockholders are encouraged to vote on the Say-on-Pay Proposal and the Incentive Award Plan Proposal before the Annual Meeting on May 22, 2025.

Key Dates

Keywords

Incentive Award Plan, Executive Compensation, Say-on-Pay, Equity Compensation, Stockholders, Teladoc Health, Compensation