What ThredUp’s Exec Comp Says About Founder Incentives

Here’s a question: What incentives does a CEO need to stick around to work hard to advance the company’s priorities? If they’re a founder with a decent equity stake, the answer should be none. The opportunity to lift the value of their existing shares should be incentive enough. That’s apparently the view of big tech firms like Meta Platforms, which doesn’t pay its founder and CEO Mark Zuckerberg. Not everyone agrees, as we’ve written. Now comes e-commerce firm ThredUp with its own twist on founder compensation. In 2022, ThredUp paid its co-founder and CEO, James Reinhart, and its co-founder and chief operating officer, Christopher Homer, cash “retention bonuses” after considering “the highly competitive employment market and to incentivize motivation to focus on moving business priorities forward.” 

In other words, the board worried that Reinhart and Homer, who own stock and options accounting for 10% and 4% of ThredUp, respectively, would start applying for other jobs or slack off if they didn’t get a little extra cash thrown their way. That seems doubtful. And it’s a reminder of the backwardness of many corporate compensation policies: The job of company boards is to ensure that the interests of ordinary shareholders align with those of management! This is a topic that is likely to surface more in coming days as a flood of corporate securities filings discloses CEO compensation for 2022. ThredUp reported relatively early—its disclosure actually came out on Friday, when much of the world was not watching business news, so we thought we’d do everyone a favor and spotlight it. But it surely won’t be the last company to reveal some wrongheaded compensation decisions.