Xero, an accounting software firm that provides cloud-based solutions to small and medium-sized businesses, is currently valued at $13.6 billion. Its chairman, David Thodey, is actively meeting with investors to discuss rebasing Chief Executive Sukhinder Singh Cassidy’s remuneration package. This comes after a challenging year for shareholders, which saw Xero’s share price plummet by 60 per cent, wiping $14 billion off its market capitalisation. The decline is largely attributed to broader concerns over AI disruption and a significant sell-off in technology stocks, colloquially known as the “SaaSpocalypse.”
Singh Cassidy’s initial December 2024 target remuneration was set at $US15.2 million ($23.5 million AUD), excluding a one-off grant of 575,000 options with an initial fair value of $US26.5 million. These options, struck at an exercise price of $171.11, are now almost worthless, given Xero shares were recently trading around $73.74. Thodey’s campaign aims to adjust her remuneration to ensure Singh Cassidy retains a stake equivalent to 1 per cent of the company’s market capitalisation, seeking to bolster her Silicon Valley-style pay despite the share price erosion.
However, some investors are reportedly wary of topping up the executive’s compensation, arguing that while remuneration should incentivise growth, it must also reflect the poor shareholder experience over the past year. Hailey Kim, senior investment analyst at Wilson Asset Management, noted a “legitimate tension if the share price continues to fall and remuneration stays elevated.” Xero’s board asserts that 96 per cent of Singh Cassidy’s pay is performance-based and tied to Xero’s global financial and shareholder-return results, benchmarking executive roles against global peers to attract and retain world-class leadership in a competitive market.
The company has previously faced scrutiny over its remuneration practices, with its report narrowly avoiding a “second strike” at last year’s Annual General Meeting, though as a New Zealand domiciled entity, it is not strictly subject to the rule. Despite investor scepticism regarding Xero’s $4 billion acquisition of vendor-finance company Melio last year, broker E&P suggests Xero might be gaining traction in the US. The broker indicates Xero is benefiting from growing user frustration with competitors like Intuit-owned Quickbooks, potentially signalling improved opportunities in the US market.
