Proxy adviser Institutional Shareholder Services is urging investors of the troubled health care company and city migrant-services vendor DocGo to vote out the board’s chairman and against the CEO’s pay.
ISS recommends shareholders unseat DocGo’s board chairman Steven Katz, who has served for just two months after succeeding Stanley Vashovsky as chair on April 1. The firm also called for investors to vote against the pay of its CEO Lee Bienstock, whose total compensation in 2023 was $11.54 million — a more than 370% increase from the $2.45 million earned in 2022 by Vashovsky, who at the time also served as DocGo’s CEO.
The Wednesday report, obtained by Crain’s New York Business, offers a scathing rebuke of DocGo’s leadership. It notes that the CEO’s pay is more than four times the median of peer executives and that “the board’s failure” to eliminate provisions in how the company is governed “adversely impacts shareholder rights.”
Those provisions include DocGo’s structure as a classified board, which prevents shareholders from holding directors accountable on an annual basis and can entrench management, and the requirement of a supermajority vote to adopt, amend or repeal certain provisions of the company’s charter. Such a majority could lock in rules that may not be in shareholders’ best interest and prevent investors from making changes.
“The adverse provisions have not been removed nor are they subject to a sunset requirement,” the 26-page ISS report states.
DocGo spokeswoman Abigail Rush said the company’s governance structure aligns with market practices for newly public companies (DocGo went public in 2021). “We regularly evaluate our governance structure, especially as we mature as a public company, and consider feedback from our stockholders,” Rush said in a statement.
Rush also pushed back on the report conclusions on executive pay, saying the company’s reported compensation does not reflect the actual compensation realized by its executives due to Security and Exchange Commission reporting rules. As of December 2023, Rush said DocGo’s equity grants now include a performance-based vesting component.
ISS cited “unmitigated pay-for-performance misalignment” in recommending that investors vote against ratifying executives’ compensation.
DocGo reported revenue growth in 2023, but ISS emphasized that the company’s performance with respect to most earnings and profitability measures declined compared to the previous year. And DocGo’s stock currently hovers around $3 a share — down from $8.90 a year ago and from a company high of $10.82 per share in October 2022.
The company’s stock has suffered owing to a year and a half of controversies. In April, the Adams administration decided to scale back its relationship with DocGo by declining to renew the provider’s $432 million contract to care for and transport migrants upstate. Investors in the company have an ongoing class-action lawsuit against the firm, seeking to recoup losses they suffered after the company’s stock prices fell following recent negative news coverage.
But while the company’s “performance generally deteriorated” the pay to its CEO saw a nearly five-fold increase, the ISS report notes.
Former DocGo CEO Anthony Capone resigned in September after the Albany Times Union revealed he had misrepresented his college education. Bienstock, who has previously served as president and COO, was appointed to the role of CEO in November and his base salary was increased to $785,000.
Effective April 2023, Bienstock in his previous roles as president and COO earned a base salary increase of 18% from $415,000 to $490,000. A month later he also received 2,178 shares (worth an estimated $18,750). So when he took over the role of CEO, his pay bump represented a 60% increase. In 2023, Bienstock’s actual salary was $581,948.
DocGo in 2023 awarded Bienstock a bonus of $506,625, while other executives received target bonuses between $186,000 and $600,000.
The company’s compensation committee, in reviewing the company’s 2023 performance, saw fit to award Bienstock a discretionary bonus of more than $1 million, bringing his overall bonus award up to $1.6 million — nearly three times his actual salary during 2023. Other executives’ total bonuses were between $500,000 and $975,000. Bonuses were paid half in cash and half in grants of restricted stock units that vest in six equal quarterly installments beginning in April.
ISS said “outsized equity awards” continued to feed Beinstock’s pay. Bienstock’s equity compensation as CEO in 2023 jumped to a total of $9.33 million, which is approximately 3.5 times the median total pay of peer CEOs and represents 81 percent of his total compensation, according to ISS.
The performance metrics and measurements DocGo uses for some of its executives’ awards, ISS said, “runs the risk of duplicative rewards for the same area of performance and runs the risk of focusing on a narrow aspect of company performance for a short period of time.”
DocGo’s annual meeting is scheduled for June 18.
Caroline Spivack , 2024-05-30 20:32:34
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