Warby Parker Is Great at More Than Just Eyeglasses
(Bloomberg Opinion) -- When a company files with the Securities and Exchange Commission to sell shares to the public, it’s the first chance that ordinary people — individual investors, journalists — get to see what’s behind the curtain. There’s a lot one can learn, well beyond the financials, from the prospectus and the way it’s presented.
I thought about this the other day as I was reading Warby Parker’s newly filed prospectus (officially Form S-1). I was already familiar with the company, having purchased a few pairs of glasses from them in the eleven years since they first opened their online store. I liked the ease of ordering, the curated collection of frames and the price. As someone who’s worn glasses since the third grade, I still have memories of spending hours at the LensCrafters in Brooklyn’s Kings Plaza looking at endless pairs of ugly frames with the added bonus of surly service.
But as someone who reads a lot of corporate disclosures, I found something else that appealed to me: the simplicity of the company’s filing. Unlike a lot of other recent IPO prospectuses, Warby Parker’s wasn’t larded up with all sorts of perks and outrageous compensation. To say it was refreshing would be an understatement.
The summary compensation table included reasonable salaries for the three top executives and a very modest 401-K match. Trust me on this one: Any time you see a CEO getting paid less than $1 million at a publicly traded company, it’s worth noting. Beyond that, Warby Parker’s directors have so far worked without compensation (though that’s likely to change once the company goes public), and insiders don’t appear to have unduly enriched themselves through “related-party” transactions with the company. One can only hope that this minimalism persists, and perhaps even spreads to other companies.
When I first posted my impressions on Twitter, someone tweeted that it was the anti-WeWork, referring to the office space company that has already inspired the writing of two books with its spectacular excess. For those who don’t remember, The We Company’s S-1 included a shockingly audacious $5.9 million payment to a company controlled by co-founder Adam Neumann for rights to the word “We.” Although Neumann agreed to repay the money after the deal was disclosed, the filing still spoke volumes about the company’s off-the-rails approach to compensation and much else.
Even in less-extreme cases, there’s plenty that should concern shareholders. Consider online retailers FIGS Inc., The Honest Co Inc. and Poshmark Inc., all of which recently sold shares to the public. At FIGS, co-founders Heather Hasson and Trina Spear each received nearly $40 million in 2020, including $1 million bonuses and $38 million in option awards. At the Honest Company, CEO Nick Vlahos received a $4 million bonus on top of his $803,000 salary. At Poshmark, CEO Manish Chandra received more than $4 million in stock and option awards in 2020, according to the company’s annual report.
Don’t get me wrong: Entrepreneurs who build something successful should be rewarded for their hard work. But there’s a difference between being rewarded and treating the company as your personal piggy bank.
When Warby Parker goes public, its executives will likely benefit immensely through their holdings of stock. That’s totally fine. The filing notes that Co-Chief Executives Dave Gilboa and Neil Blumenthal each received 69,303 restricted stock units in January 2021, and each purchased nearly 300,000 more shares in 2021, exercising options and rights granted at what the company determined to be the fair market value. Most of the shares can’t be sold immediately and it’s too early to know how much they’ll be worth in the public market, but it’s safe to say that the pair can potentially reap millions of dollars.
Years ago, I used to hand out gold stars to companies that were doing a good job with their disclosure, or not shelling out excessive amounts in compensation. After reading Warby Parker’s filing, I’m thinking it might be time to start back up again.
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