DEFA14A: Veeva Systems Defends Director Nominees and CEO Compensation Against Proxy Advisor Criticisms Ahead of Annual Meeting

Veeva Systems Inc. has issued supplemental material to its 2025 proxy statement, strongly disagreeing with Institutional Shareholder Services (ISS) and Glass Lewis's recommendations against the re-election of certain director nominees.

Summary

• Veeva Systems Inc. has filed supplemental material for its 2025 Annual Meeting of Shareholders, scheduled for June 18, 2025, to address recommendations from Institutional Shareholder Services (ISS) and Glass Lewis.
• The company strongly disagrees with ISS and Glass Lewis's recommendations against the re-election of Mr. Mark Carges, Mr. Gordon Ritter, and Mr. Matt Wallach to the board.
• ISS and Glass Lewis recommended against Mr. Ritter and Mr. Carges due to their roles on Veeva's Compensation Committee, citing an 'outsized' 2024 option grant to CEO Peter Gassner.
• The 2024 Performance Options granted to Mr. Gassner consist of 2,650,000 shares with a premium exercise price of $236.90, equal to the 52-week high at the time of grant.
• These options feature service-based vesting through February 1, 2030 (contingent on CEO tenure), an additional vesting condition requiring the stock price to meet or exceed the 52-week high for 60 consecutive trading days, and a two-year post-exercise holding period through February 1, 2032.
• Veeva states that these options are intended to be Mr. Gassner's only equity-based compensation until at least 2030, aligning with the board's practice of five-year long-term incentive programs for the CEO.
• The board argues that the annualized value of the 2024 Performance Options is approximately $34.4 million, which falls within the $9 million to $97 million range of annualized CEO pay among its peer group.
• Veeva criticizes ISS's pay-for-performance analysis for using the total grant value instead of the annualized amount and for including significantly smaller companies in its peer analysis.
• Mr. Gassner's annual base salary for fiscal year 2025 is $450,000, and he has not received any other cash compensation since the company's IPO.
• Veeva engaged with shareholders representing approximately 40% of outstanding shares, reporting positive feedback on the 2024 Performance Options and no concerns regarding excessive compensation.
• ISS recommended against Mr. Wallach, suggesting he is not independent due to his co-founder title, which Veeva disputes, asserting he meets NYSE independence standards and has not been employed by the company since June 2019.
• Glass Lewis recommended against Mr. Wallach due to his brother being a Veeva employee, which Veeva refutes, stating his brother is not an executive officer and NYSE standards exclude non-executive family compensation for director independence determination.

Sentiment

Score: 4

Explanation: The document is a defensive response to negative recommendations from influential proxy advisory firms, indicating a challenge to corporate governance and executive compensation practices. While the company presents its arguments positively, the need for such a detailed defense suggests underlying negative pressure or disagreement from key stakeholders (proxy advisors).

Positives

• CEO Peter Gassner has led Veeva since its founding in 2007, contributing approximately $35 billion in market capitalization growth from the IPO (2013) through January 31, 2025.
• The 2024 Performance Options for the CEO are structured with a premium exercise price ($236.90), requiring significant stock price appreciation for value realization, which strongly aligns CEO incentives with shareholder interests.
• The options include a service-based vesting condition through February 1, 2030, contingent on Mr. Gassner's continued service as CEO, ensuring long-term retention of key leadership.
• An additional vesting condition requires the stock price to meet or exceed the 52-week high for 60 consecutive trading days, directly linking compensation to sustained high company performance.
• A two-year post-exercise holding period through February 1, 2032, further aligns the CEO's long-term interests with the company's sustained success.
• The 2024 Performance Options are intended to be the CEO's only equity-based compensation until at least 2030, providing a clear and focused long-term incentive framework.
• Veeva's board's peer review found the annualized value of the CEO's options ($34.4 million) to be within the competitive range of annualized CEO pay among its peers ($9 million to $97 million).
• The CEO's annual base salary is a below-market $450,000 for fiscal year 2025, and he has received no other cash compensation since the IPO, emphasizing performance-based equity compensation.
• Shareholders holding approximately 40% of outstanding shares provided positive feedback on the 2024 Performance Options and did not express concerns about excessive compensation.
• Mr. Wallach meets NYSE independence standards, despite proxy advisor concerns, and his deep knowledge of Veeva, life sciences technology expertise, and customer relationships are considered valuable contributions to the board.

Negatives

• Institutional Shareholder Services (ISS) and Glass Lewis recommended against the re-election of Mr. Ritter and Mr. Carges due to their role on Veeva's Compensation Committee, characterizing the 2024 option grant to the CEO as 'outsized'.
• ISS's pay-for-performance analysis is criticized by Veeva for using the total grant value of the CEO's options, which creates an 'outsized impact' on fiscal year 2025 and no impact in other vesting years.
• ISS's peer analysis is deemed flawed by Veeva for including companies (e.g., Teradata Corporation and Evolent Health, Inc.) that are significantly smaller than Veeva in size and market capitalization.
• ISS suggested Mr. Wallach is not independent due to his 'honorific title as one of our founders'.
• Glass Lewis suggested Mr. Wallach has a material affiliation with the company or its management merely because his brother is a Veeva employee.

Risks

• Risk of certain director nominees (Mr. Mark Carges, Mr. Gordon Ritter, and Mr. Matt Wallach) not being re-elected at the 2025 Annual Meeting due to negative recommendations from influential proxy advisory firms (ISS and Glass Lewis).
• Potential for misinterpretation or negative perception of executive compensation structure by proxy advisors and some shareholders, which could lead to adverse voting outcomes on governance proposals.

Future Outlook

The board intends for the 2024 Performance Options to be Mr. Gassner's only equity-based compensation until at least 2030, aiming to retain him and incentivize continuous growth and entry into horizontal software markets beyond the company's traditional markets.

Management Comments

• "We strongly disagree with each of ISS and Glass Lewis recommendations and have prepared this supplement to augment our 2025 proxy disclosures and further support the re-election of Mr. Mark Carges, Mr. Gordon Ritter, and Mr. Matt Wallach."
• "Mr. Gassner's tenure as CEO has been a success by all measures and the board believes that continuity in the CEO position during the company's next phase of growth through 2030 and entry into horizontal software markets outside of the company's traditional markets is essential."
• "Our board believes that long-term incentive compensation in the form of stock options is thus necessary and appropriate to retain Mr. Gassner and align his long-term interests with those of our shareholders."
• "The board believes that the 2024 Performance Options are a strongly motivating, performance-based incentive compensation vehicle appropriately structured to retain Mr. Gassner and motivate him to continue growing the company on a continuous trajectory through 2030 and beyond."
• "No shareholders expressed concerns that Mr. Gassner's compensation was excessive in comparison to our peer group."
• "Our board strongly encourages you to vote FOR Mr. Carges and Mr. Ritter on Proposal One."
• "Our board strongly encourages you to vote FOR Mr. Wallach on Proposal One."
• "FOR THESE REASONS, WE URGE OUR SHAREHOLDERS TO VOTE FOR ALL DIRECTOR NOMINEES."

Industry Context

This document highlights the ongoing tension between corporate boards and proxy advisory firms (ISS, Glass Lewis) regarding executive compensation practices and director independence. It reflects a common challenge for companies, especially in the high-growth technology sector, to design compensation packages that retain top talent while satisfying shareholder governance expectations and proxy advisor guidelines. The debate over 'outsized' grants and appropriate peer group selection is a recurring theme in corporate governance, particularly for companies with long-tenured, founder-CEOs.

Comparison to Industry Standards

• Veeva's board's peer review found the calculated annualized amount of the 2024 Performance Options ($34.4 million) was within the range of annualized CEO pay amongst their peers, which ranged from approximately $9 million to $97 million.
• Five peer CEOs (only one of whom was a newly hired CEO in 2024) had annualized target direct compensation greater than the annualized value of Mr. Gassner's 2024 Performance Options.
• Veeva's peer group, comprised of 19 companies, was recommended by its independent compensation consultant and approved by the Compensation Committee in September 2023.
• Veeva criticizes ISS's peer analysis for using companies such as Teradata Corporation and Evolent Health, Inc., which are significantly smaller than Veeva in size and market capitalization.
• Veeva contrasts its CEO's compensation structure (premium-priced options, low base salary, no annual cash incentive) with most peer companies that incorporate significantly higher fixed and full-value compensation elements, arguing its structure provides better built-in incentive and alignment with shareholder interests.

Corporate Governance

Related Party Transactions

• Mr. Matt Wallach's brother is a long-time Veeva employee, but he is not an executive officer, and Mr. Wallach has no role in setting his compensation. NYSE listing standards explicitly exclude compensation received by family members for service as a non-executive employee in determining director independence.

Stakeholder Impact

• **Shareholders**: Encouraged to vote FOR all director nominees; provided additional context on CEO compensation and director independence to inform voting decisions; potential impact on long-term value through CEO retention and performance incentives.
• **Employees**: CEO retention through 2030 is emphasized as essential for the company's next phase of growth, potentially providing stability and clear leadership.
• **Management**: The CEO's long-term incentive structure is designed to align his interests with the company's strategic goals and public benefit purpose, motivating continued high performance.

Next Steps

• Shareholders are urged to vote FOR all director nominees at the 2025 Annual Meeting on June 18, 2025.
• The board intends for the 2024 Performance Options to be the CEO's only equity-based compensation until at least 2030.
• The company aims for continued growth and entry into horizontal software markets outside its traditional markets through 2030 and beyond under the current CEO's leadership.

Key Dates

Recommendation

Keywords

Veeva Systems, SEC filing, DEFA14A, proxy statement, corporate governance, director election, executive compensation, CEO options, Peter Gassner, Mark Carges, Gordon Ritter, Matt Wallach, Institutional Shareholder Services, ISS, Glass Lewis, shareholder meeting, public benefit corporation, NYSE independence standards, market capitalization, long-term incentive