Yelp Inc. (YELP) Earnings Call Transcript & Summary

Good morning, and welcome to Yelp Inc.'s 2021 Annual Meeting of Stockholders. I will now turn the conference over to Diane Irvine. Please go ahead.

Thank you, and good morning. Welcome, and thank you for joining us for Yelp's 2021 Annual Meeting of Stockholders. I'm Diane Irvine, Chair of the Yelp Board of Directors. I will act as Chair of this annual meeting, which I now call to order. Our agenda will start with the business set forth in the proxy statement. After the formal part of the meeting, we'll conclude with the Q&A session. Let me start by introducing the members of our Board of Directors who are with us today: Jeremy Stoppelman, our Chief Executive Officer; Fred Anderson; Christine Barone; Robert Gibbs, George Hu, Sharon Rothstein, Brian Sharples and Tony Wells. Laurence Wilson, our General Counsel and Corporate Secretary, is also here with us today and will act as Chair of the meeting in the event of any technical difficulties that prevent me from performing the duties of Chair. We are also joined by Kasey Petteys and Matt Hutton of Deloitte & Touche, Yelp's independent registered public accounting firm, who are available to respond to appropriate questions. Finally, I'd like to introduce David Peinsipp of Cooley LLP, Yelp's outside counsel, who will act as the inspector of election for this meeting and who will tabulate the results of the voting. Mr. Peinsipp has taken and subscribed to the customary oath of office to execute his duties with strict impartiality, and his oath will be filed with the records of this meeting. I will now turn the meeting over to Laurence to report on the mailing of the notice for this meeting and the stockholder list as well as to confirm whether we have a quorum.

Thanks, Diane. On April 23, 2021, a notice of this annual meeting was properly mailed or made available to all stockholders of record as of the close of business on April 5, 2021, the record date of this meeting. A complete list of the stockholders of records as of the record date is available under the Meeting Materials section of the webcast portal for this meeting. I've been advised by the inspector of election that the holders of shares representing approximately 90% of the outstanding shares of our common stock entitled to vote are represented by proxy here today, which constitutes a quorum. Accordingly, this meeting is authorized to transact the business set forth in the notice and proxy statement.

Thank you. We'll now proceed with the formal business of this meeting. There are 4 proposals to be considered by stockholders today. Each proposal as well as information about the Board's recommendation for each proposal are described in the proxy statement. I will now review the proposals, and we will then invite questions from stockholders before reviewing the voting procedures. The first item of business is to elect 4 directors to serve until our next annual meeting. The director nominees are Robert Gibbs, George Hu, Jeremy Stoppelman and Tony Wells. The Board recommends a vote for the election of each of the nominated directors. The qualifications of each nominee and additional information regarding our Board are set forth in the proxy statement. The second item of business is to ratify the selection of Deloitte & Touche as our independent registered public accounting firm for the year ending December 31, 2021. The Board recommends a vote for this proposal. The third item of business is the advisory vote on the executive compensation of our named executive officers as described in the proxy statement. The stockholders have been asked to vote on an advisory basis on the following resolution: resolved that the compensation paid to the company's named executive officers as disclosed pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the compensation tables and any related material disclosed in the proxy statement, is hereby approved. The Board recommends a vote for this resolution. The fourth item of business is a stockholder proposal regarding transition to a public benefit corporation made by James McRitchie. The Board recommends a vote against this proposal, and our position on the proposal is set forth in the proxy statement. Mr. McRitchie's argument in favor of the proposal are also set forth in the proxy statement, and Sara Murphy will now present the proposal on behalf of Mr. McRitchie. Operator, would you please open Ms. Murphy's line?

Ms. Murphy, your line is open.

Thank you. Can you hear me?

Yes, we can, ma'am..

Thank you. Shareholders request that our Board take the necessary steps to convert Yelp to a public benefit corporation, especially in light of our company's commitment to stand against racism and injustice in our communities, support Black-owned businesses, and support our Black employees "by looking inward to reexamine inclusivity within our own organization to ensure that we make the change we want to see in the world." While we believe our Board genuinely desires to make good on these statements, our directors are fundamentally precluded from doing so under Yelp's current corporate form. Our Board says Yelp has a dedicated employee base, large community of users and growing business, which it says wouldn't be possible if it operated in an imprudent and short-sighted manner. But how do we square that assertion with recent allegations of a toxic corporate culture replete with sexist and racist harassment, pyramid schemes imposed on employees by managers and aggressive sales pressure that pushed some employees to pursue unethical tactics and others to suffer mental health deterioration? Yelp has been a subject of media reports detailing ugly and unethical practices that harm various stakeholders and, by extension, diversified shareholders. An August 2019 investigation described underhanded business practices at Yelp that undermine small restaurant owners by charging them hidden fees. These would presumably include some of the same Black-owned businesses Yelp purports to support. A November 2020 article described a high-pressure sales culture at Yelp, featuring heavy drinking, sex tapes and a pyramid scheme. The article was based on interviews with current and former Yelp employees and detailed how female and Black sales staff were required by their managers to endure sexual and racial harassment from business owners if it would help close a sale. There was an incident in which a male employee had sex with a colleague, recording a video of the encounter without her knowledge and circulating it around the office. And in early 2020, workers in Yelp's Chicago office became embroiled in a pyramid scheme in which some managers were asking employees to give them $100, with the promise that they would subsequently make $800 by soliciting donations from others. Our Board acknowledges challenges in operating and managing Yelp's business. The cause lies in our corporate form. Because Yelp is a conventional Delaware corporation, our directors' hands are tied by a legal obligation to privilege Yelp's internal financial returns above all other considerations. That's a terrible deal for Yelp's diversified shareholders because a healthy global economy is the key driver of long-term investment success and a far greater value booster for diversified portfolios than the profits of any one company within those portfolios. A recent study determined that listed companies create annual social and environmental costs of $2.2 trillion, equal to more than 2.5% of global GDP. These costs have many sources, including employee stress and racial inequality. That matters to Yelp shareholders, the majority of whom are beneficial owners with broadly diversified interest. Such shareholders and beneficial owners are unalterably harmed when companies follow Delaware's shareholder primacy model and impose costs on the economy that lower GDP, which reduces equity value. In other words, while Yelp may increase its isolated return to shareholders by applying the company-first shareholder primacy model and neglecting the costs that it externalizes, its diversified shareholders will ultimately pay these costs. As a public benefit corporation, Yelp could prioritize reducing these costs. Directors of public benefit corporations must balance the interests of shareholders, stakeholders and a specified benefit, which would give legal status to Yelp's otherwise empty promises around inclusivity and racial justice. Shareholders are entitled to vote on a change that would serve their interests and ensure Yelp's commitments to stakeholders are authentic and lasting. At the Shareholder Commons, we have a deep experience in benefit corporation law, and we would be happy to help the Board to navigate Yelp's conversion. We urge you to please vote for item 4.

Thank you for your statement, Ms. Murphy. The company's response and position on this proposal are set forth in the proxy statement. That was the final proposal for today's meeting. We welcome questions from stockholders on the proposals at this time. If there are no questions, the secretary will now describe the voting procedures.

Voting today is by proxy and electronic ballot. Each share of common stock is entitled to 1 vote. Stockholders who have submitted proxies or who have previously voted via the Internet or by phone and who do not wish to change their vote do not need to take further action. Their votes will be counted automatically. Any stockholder present who has not voted or who wishes to change their vote may do so by using the voting link on the meeting website and following the instructions provided. We will leave the polls open for approximately 2 minutes to allow anyone who chooses to vote to cast ballots. It is now 9:42 a.m. Pacific time, and the polls are open for voting. The 2 minutes begins now. [Voting]

The time is now 9:45 a.m. Pacific, and the polls are now closed for voting.