(Excerpt, full proxy here)
As a PBC, Veeva would adopt the following public benefit purpose:
Public Benefit Purpose. The specific public benefits to be promoted by the corporation are to provide products and services that are intended to help make the industries we serve more productive, and to create high-quality employment opportunities in the communities in which we operate.
As a PBC, Veeva would adopt the following obligation to balance the interest of stakeholders:
The Corporation shall be a public benefit corporation, as contemplated by subchapter XV of the DGCL, and is to be managed in a manner that balances our stockholders’ pecuniary (financial) interests, the best interests of those materially affected by the corporation’s conduct (including customers, employees, partners, and the communities in which we operate), and the public benefits identified in this certificate of incorporation. We believe this corporate structure reflects our guiding principle, “do the right thing.”
Why Converting to a PBC is Right for Veeva and Shareholders
PBC conversion better aligns our legal responsibilities to our core values — do the right thing, customer success, employee success, and speed — and our approach to decision making. More specifically, we believe that becoming a PBC is valuable for our customers and employees, does not diminish the rights of our investors, may benefit our relationships with other key groups, and can be beneficial to our long-term financial performance. We believe that these factors accrue to shareholder value creation. We will start with our customers.
Our customers. The broad goal of the principal industry we serve — life sciences — is to improve health and extend lives. Helping the life sciences industry be more productive in pursuit of that goal is a natural public benefit that has never been more important.
As our product and service offerings have expanded, Veeva has become a trusted technology partner for the most important functions of life sciences companies, including clinical trial management, regulatory submissions, pharmacovigilance (drug safety), manufacturing quality processes, data, and communications between life sciences companies and doctors. As our customers increasingly rely on us to help them get the right treatments to patients more efficiently and effectively, we have become operationally significant to our customers and also a meaningful part of the healthcare ecosystem that is critical to society.
Long-term purpose alignment with our customers and the industry we serve is important as we ask our customers to make even deeper commitments to Veeva for technology systems they may use for decades. We believe our proposed public benefit purpose (and our PBC commitment to consider the interest of customer stakeholders) solidifies this alignment and can give our customers increased confidence to invest in Veeva’s technology solutions, which has the potential to make our revenue base more durable and enhance our ability to invest in innovation for our customers. We believe these customer benefits translate to better shareholder returns over the long term.
Our employees. We also believe that our proposed public benefit purpose will help us attract and retain the best employees—diverse employees who value giving their best to a company whose purpose matters. We are already a company that has created thousands of relatively high-paying jobs, with good benefits in an industry with few environmental risks and many social benefits. We are also a company that is intellectually and professionally challenging, that invests in employees and supports their development and mobility (including never imposing non-compete obligations as a condition of employment), that seeks to reduce bias, increase inclusion and that supports employee-driven charitable priorities.
Our position on many of these issues is reflected in our statement on corporate citizenship that is posted on our website, and we expect our disclosures on these and similar employee-related topics will expand as a PBC. We believe our PBC purpose (and our PBC commitment to consider the interest of employee stakeholders) will enhance relationships with the best employees and job candidates, thus enabling us to better support our customers and drive results for investors.
The rights of our investors. Upon conversion to a PBC, our shareholders will continue to have all of the protections and governance rights that shareholders of traditional companies have, including rights to elect the Board, file shareholder proposals, pursue fiduciary duty litigation, and vote on major corporate transactions like charter amendments and mergers, as well as to tender their shares in connection with a hostile takeover structured as a tender offer. Our Board also considered that if Veeva were to convert to a PBC, only shareholders that own at least the lesser of (i) 2% of the voting power of Veeva’s outstanding shares or (ii) $2 million worth of outstanding shares could file a lawsuit alleging we breached our fiduciary duty to balance the financial interests of shareholders, the interests of other stakeholders, and pursuit of our public benefit purpose. In addition, Delaware’s longstanding “business judgment rule” should apply to balancing determinations so long as directors remain informed and free of conflicts of interests.
Sustainability-Focused Investors. When we engaged with shareholders prior to deciding whether to propose the PBC conversion, we were encouraged by the number of investors that are focused on corporate sustainability. Our Board is particularly heartened by the rapid growth in investment funds that look to invest in responsibly run companies who combine creating value for shareholders with helping to further a public benefit. Becoming a PBC can serve as evidence of our shared commitment to long-term responsible performance and may make Veeva a more attractive investment to this rapidly growing category of investors.
Regulators. Regulators play an important role in the businesses of our customers. Our products and services often help our customers maintain regulatory compliance and be more responsive to regulators. We believe that having a legally formalized public benefit purpose may be helpful in any interactions we have with regulators on behalf of our customers or on our own behalf. For example, in July 2020, in response to COVID-19 challenges, the U.S. Department of Health and Human Services (“HHS”) issued a memorandum recommending the Veeva SiteVault Platform, among others, as a means to continue remote monitoring programs of AIDS-related clinical trials. The memorandum noted that our Veeva SiteVault solution can be used free of charge. We believe that the mission alignment expressed in our proposed public benefit purpose and the increased flexibility to address unexpected events as a PBC can enhance our reputation and the reputation of our products with the HHS (including the U.S. Food and Drug Administration) and other regulators, as our decision to offer a free remote monitoring solution for under-resourced clinical trial sites did in 2020. We also believe these reputational benefits can lead to increased confidence and adoption of our fee-based products over time, which accrues to the financial benefit of shareholders.
Our financial results. We do not expect conversion to a PBC to impact any of our existing financial targets, and our Board believes that a PBC conversion has the potential to be beneficial to our long-term financial results. We see social and economic benefits as complementary and have always operated with the long-term view that doing the right thing for our customers, employees, partners, and communities ultimately allows us to deliver the best results for shareholders. It is worth noting that an increasing number of large investors share our view that a sense of purpose and commitment to stakeholders is key to long-term financial performance.
Our reputation. We believe our conversion to a PBC, if executed well, has the potential to enhance our reputation as an honorable and long-term focused company. This is in part because we believe that as a PBC we can attract employees who care about purpose, values, and customer success and who will therefore act to make us a company worthy of admiration.
Other considerations. Status as either a traditional Delaware corporation or as a PBC is no guarantee of future performance. While we believe that conversion to a PBC is in the best interests of our shareholders and will have many positive benefits as described above, it could potentially have negative effects on our company. For example, if a shareholder meets the applicable thresholds described above, it could file a lawsuit alleging we breached our fiduciary duty to balance the financial interests of shareholders, the interests of other stakeholders, and pursuit of our public benefit purpose, and any such lawsuit could be costly and time consuming to defend. We also expect modest additional expenses and headcount requirements relating to PBC reporting. If, however, the DGCL is amended in the future to require more explicit or onerous periodic reporting requirements of PBCs, it could further increase our costs of remaining a PBC. In addition, if the public perceives that we are not successful in our public benefit purpose, or that our pursuit of our public benefit purpose is having a negative effect on the financial interests of our shareholders, that perception could negatively affect our reputation, which could adversely affect our business and results of operations.
Our View on Veeva’s PBC Balancing Obligation
Throughout Veeva’s history, we have considered the interests of our customers, employees, partners, and the communities in which we operate as we have deliberated over what was in the best interests of our shareholders. We believe that most, if not all, companies that have achieved meaningful success and maintained market leadership over longer periods must, in various ways, prioritize the needs of their various stakeholders along with their shareholders. It is, we believe, a false dichotomy to suggest otherwise. Further, we do not believe that balancing the interests of all stakeholders will require us to take actions that do not maximize shareholder value over the long term.
As a PBC, we would still have a fiduciary duty to shareholders. And while our stated public benefit purpose must have a positive effect on non-shareholders, it may also benefit shareholders. We believe our proposed public benefit purpose does. Our obligation would be to balance the financial interests of shareholders with the best interests of those materially affected by our conduct and the public benefit purpose we have proposed. It is hard to envision a circumstance in which those interests would not be aligned over the long term. Shareholders benefit over the long term when employees are engaged and happy and when customers are more productive. In the primary industry we serve—life sciences—a more productive customer may also mean better outcomes for patients and society as a whole when, for instance, a clinical trial can be started more quickly and administered more efficiently using our technology solutions. These benefits for our customers would naturally result in financial benefits for Veeva and its shareholders. It is our Board’s belief that it is appropriate to memorialize our commitment to consider the interests of multiple stakeholders as an essential part of our effort to create long-term, sustainable value for shareholders and, if done well, a societal benefit as well.