Bitcoin Mining Execs Do Serious Banking Vs Other Industries

A recent shareholder vote to reject a major Riot Blockchain advisory vote on executive compensation suggests a potentially high-risk trend in the bitcoin mining industry.

Riot’s shareholders, in a rustic example of TradFi (traditional finance) governance, are allowed to vote on various decisions related to how the bitcoin mining company is run.

An 8-K filing shows that Riot’s annual general meeting held on July 27 saw shareholders approve a number of proposals: electing a new director in Hubert Marleau; ratification by independent auditor Marcum LLP; and approval of an amendment to the share incentive plan for 2019.

But shareholders did not agree with the board’s unanimous recommendation urging them to vote in favor of a “say-on-pay” proposal, VanEck analysts noted, which would have paid out more than $90 million to five Riot executives.

CEO Jason Les and Executive Chairman Benjamin Yi were to receive about $21 million each. Even the lowest-paid executive, Attorney General William Jackman, was in line for a $13 million bonus. In the meantime, the annual bonuses were left empty, indicating payments afterwards.

The proposal was designed to retain talent and ensure the achievement of long-term strategic goals.

VanEck’s head of digital asset research Matthew Sigel and product analyst Naomi Zimmermann then decided to zoom out from Riot and check compensation at other major mining firms.

The analysts found that bitcoin miners collectively paid “enormous” prices to named executive officers (NEOs), relative to the energy and IT industries and companies listed in the Russell 3000. The analysts also described the compensation practices of Riot and its competitors as “risky.”

The IT industry counted median total direct compensation of $2.2 million in 2022, according to VanEck. Riot other crypto mining companies paid out median compensation of $10.8 million – 390% more than the IT sector.

“These more excessive executive compensation practices (among RIOT and its peers) could lead to pressure on peer companies in the digital asset industry to provide similarly large awards, in the absence of shareholder backlash,” VanEck’s analysts wrote.

“Seeing eight-to-nine figures for executives of firms that have yet to make a profit can be uncomfortable in any industry.” Blockworks has reached out to Riot for comment.

VanEck expects that increased awareness of the environmental impact of bitcoin mining will draw attention to industry executive compensation standards and other governance matters.

Riot, which has a market capitalization of more than $1 billion, counts Vanguard, Blackrock, Morgan Stanley and Mirae Asset Global Investments among its top institutional owners.

The miner’s shares have plunged nearly 70% so far this year, and are down about 4% in the past month to $7.04 a share, TradingView data show.

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