MercadoLibre (MELI) DEF 14ADefinitive proxy

Under U.S. Securities and Exchange Commission (“SEC”) rules, we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. The Notice of Internet Availability mailed to our stockholders contains instructions on how to access our proxy materials, including our proxy statement and our 2021 Annual Report. The Notice of Internet Availability also instructs you on how to access your proxy card to vote through the Internet or by telephone.

This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the annual meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

Hope is the confidence that something good will happen. A positive feeling that, when accompanied by action, allows us to overcome adversity. The last two years —marked by an unprecedented global pandemic— have undoubtedly put this human capacity to the test: the ability to project a future horizon better than the current one, trusting that “the best is yet to come.” For us, this is much more than a slogan: it is the power that drives us.

During the last two unprecedented years, MercadoLibre has assumed the essential role of ensuring access to our many important services and products that impact our users’ lives. We assumed this unique and privileged position with great responsibility. We did this also with a focus on strengthening our purpose: democratizing commerce and financial services to transform the lives of millions of people in Latin America. Today more than ever, we know that the world needs transformation. That is why we want to be better every day, taking into account the growth of our business and its environmental impact and social role.

On behalf of the board of directors, I would like to express our appreciation for your continued interest in MercadoLibre. We look forward to your attendance at the 2022 Annual Meeting of Stockholders or receiving your proxy vote.

 

Further, we have also published our Sustainability Bond report and the Task Force on Climate-Related Disclosures, which are both available on our investor relations website: https://investor.mercadolibre.com/corporate-social-responsibility.

A director elected to fill a vacancy will serve for the remainder of the term of the class of directors in which the vacancy occurred and until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. As discussed in greater detail below in “Information on our Board of Directors and Corporate Governance — Director Independence and Family Relationships” our board has determined that seven of the nine current members of our board are independent directors within the meaning of the listing standards of The NASDAQ Global Select Market (the “NASDAQ”) and our corporate governance guidelines.

The nominating and corporate governance committee recommended, and our board nominated, Richard Sanders as nominee for election as a Class II director of our Company at the 2022 Annual Meeting. If elected at the 2022 Annual Meeting, Mr. Sanders will serve until our 2024 Annual Meeting of Stockholders and until his successor is duly elected and qualified, or until his earlier death, resignation or removal.

Further, the terms of our three Class III directors are set to expire at the 2022 Annual Meeting. The nominating and corporate governance committee recommended, and our board nominated, (i) Emiliano Calemzuk and Marcos Galperin as nominees for re-election, and Andrea Petroni as a nominee for election, as Class III directors of our Company at the 2022 Annual Meeting. Mr. Balls Sallouti has chosen to not run for re-election to serve on the Board of Directors. Mr. Sallouti is relinquishing his position at the end of his current term, which coincides with the date of the Annual Meeting. Mr. Sallouti has served on the Board of Directors since 2014, providing years of valuable contributions to the Company. Mr. Sallouti’s decision not to stand for re-election to the Board was not based on any disagreement with the Company with respect to any matter relating to the Company’s operations, policies or practices. If elected at the 2022 Annual Meeting, each of the Class III director nominees will serve until our 2025 Annual Meeting of Stockholders and until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal.

Set forth below is biographical information for the nominees, as well as the key attributes, experience and skills that the board believes each nominee brings to the board.

We believe open, effective, and accountable corporate governance practices are key to our relationship with our stockholders. Our board has adopted corporate governance guidelines that, along with the charters of our board committees and our code of business conduct and ethics, provide the framework for the governance of our Company. A complete copy of our corporate governance guidelines, the charters of our board committees, and our code of business conduct and ethics may be found on our investor relations website at http://investor.mercadolibre.com. Information contained on or connected to our website is not part of this proxy statement. The board regularly reviews corporate governance developments and modifies these policies as warranted. Any changes in these governance documents will be reflected in the same location of our website.

The following is biographical information on the remainder of our continuing directors, as well as the key attributes, experience and skills that the board believes such continuing directors bring to the board.

We do not have a fixed policy with respect to the separation of the offices of the chairman of the board and chief executive officer and believe that any determination in this regard is part of the executive succession planning process. The board understands that there is no single, generally accepted approach to providing board leadership and, in light of the competitive and dynamic environment in which we operate, the appropriate board leadership structure may vary from time to time as circumstances warrant.

Mr. Galperin currently serves as both our chairman and our president and chief executive officer. Our board believes service in these dual roles is in the best interests of our Company and our stockholders. Mr. Galperin co-founded our Company, has served as chief executive officer since our inception and is the only member of management on the board. The board is confident that he possesses the most thorough knowledge of the issues, opportunities and challenges facing us and our business and, accordingly, is the person best positioned to develop agendas that ensure that the board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability and enhances our ability to communicate our message and strategy clearly and consistently to our stockholders, employees and users.

Because the board also believes that strong, independent board leadership is a critical aspect of effective corporate governance, the board has established the position of lead independent director. The lead independent director is an independent director elected annually by the board. Mr. Calemzuk currently serves as the lead independent director, a position to which he was appointed in February 2016. As lead independent director, he chairs and has authority to call formal closed sessions of the independent directors, leads board meetings in the absence of the chairman, and leads the annual board self-assessment process. In addition, the lead independent director, together with the chair of the nominating and corporate governance committee, conducts interviews to confirm the continued qualification and willingness to serve of each director whose term is expiring at an annual meeting prior to the time at which directors are nominated for re- election.

Our board will continually evaluate the current leadership structure of the board with the goal of maximizing its effectiveness.

Board committees help our board perform effectively and efficiently, but do not replace the oversight responsibility of our board as a whole. There are currently three principal standing board committees: the audit committee, the compensation committee and the nominating and corporate governance committee. Each committee meets regularly and has a written charter that has been approved by our board, which is available on our investor relations website at http://investor.mercadolibre.com. In addition, at each regularly scheduled board meeting, a member of each committee reports on any significant matters addressed by the committee subsequent to the board’s most recent prior meeting. Each committee performs an annual self-assessment to evaluate its effectiveness in fulfilling its obligations.

The following table lists the members of each of our three principal standing board committees as of the filing date of this Proxy Statement:

During fiscal year 2021, Messrs. Calemzuk (Chairman), Vazquez, Malka and Ms. Segal served as members of our compensation committee. None of the members of our compensation committee during fiscal year 2021 has ever been an officer or employee of our Company or our subsidiaries or had any relationship with us requiring disclosure as a related party transaction under applicable rules of the SEC. During fiscal year 2021, none of our executive officers served as a member of the compensation committee of another entity, one of whose executive officers served on our compensation committee; none of our executive officers served as a director of another entity, one of whose executive officers served on our compensation committee; and none of our executive officers served as a member of the compensation committee of another entity, one of whose executive officers served as a member of our board. All members of our compensation committee during fiscal year 2021 are independent in accordance with the applicable rules of NASDAQ and our corporate governance guidelines.

The mergers and acquisitions committee reviews and assesses, and assists our board in reviewing and assessing, potential acquisitions, investments and dispositions. This committee is comprised of Ms. Susan Segal and Mr. Nicolás Aguzin.

From time to time, our board may establish other committees as circumstances warrant. Those committees will have the authority and responsibility as delegated to them by our board.

Our board of directors, both directly and through its committees, including the audit committee, provides various forms of risk oversight. As part of this process, the board seeks to identify, prioritize, source, manage and monitor our critical risks. To this end, our board periodically, and at least annually, reviews the material risks faced by us, our risk management processes and systems and the adequacy of our policies and procedures designed to respond to and mitigate these risks.

The board has generally retained the primary risk oversight function and has an active role, in its entirety and also at the committee level, in overseeing management of our material risks. The board regularly reviews information regarding our operations, strategic plans and liquidity, as well as the risks associated with each. The board is also updated annually on climate-related risks and opportunities. The audit committee oversees management of financial and internal control risks as well as the risks associated with related party transactions. Our head of internal audit reports directly to the audit committee. The compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The nominating and corporate governance committee oversees the management of risks associated with the composition and independence of our board and oversees our corporate governance policies and procedures related to risk management, including our whistleblower procedures, which are also overseen by our audit committee, insider trading policy and corporate governance guidelines. In January 2021, we created the position of head of risk and compliance, who reports directly to the audit committee. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, in practice the entire board of directors is regularly informed through committee reports about such risks.

It is important to us that our board and its committees are performing effectively and in the best interests of our Company and our stockholders. The board and each committee performs an annual self-assessment to evaluate its effectiveness in fulfilling its obligations. As part of this annual self-assessment, directors are able to provide feedback on the performance of other directors. Our lead independent director follows up on this feedback and takes such further action with directors receiving comments and other directors as he deems appropriate.

The board recognizes the importance of effective executive leadership to MercadoLibre’s success, and meets to discuss executive succession planning at least annually. As part of this process, our board reviews the capabilities of our senior leadership as set out in written succession planning documents and identifies and discusses potential successors for members of our executive team, including the chief executive officer. Our nominating and corporate governance committee leads the succession planning process for our chief executive officer and other senior officers and performs a similar analysis with respect to the rest of our board.

The board and each of its committees may retain outside advisors and consultants of their choosing at our expense. The board does not need to obtain management’s consent to retain outside advisors.

Our board held six meetings and took four actions by written consent during the fiscal year ended December 31, 2021. All of our directors attended 75% or more of the aggregate of all meetings of the board of directors and the board committees on which they served during 2021.

We do not have a policy regarding director attendance at annual meetings of our stockholders. Three members of our board of directors attended our 2021 Annual Meeting of Stockholders.

At the conclusion of each regularly scheduled board meeting, the independent directors have the opportunity to meet without our management or the other directors. The lead independent director leads these discussions.

Stockholders may communicate with our board, board committees or individual directors, including the lead independent director, c/o Corporate Secretary, WTC Free Zone Dr. Luis Bonavita 1294, Of. 1733, Tower II Montevideo, Uruguay, 11300. The nominating and corporate governance committee has delegated responsibility for initial review of stockholder communications to our head of Investor Relations. In accordance with the committee’s instructions, our investor relations team will summarize all correspondence and make it available to each member of our board. In addition, our head of Investor Relations will forward copies of all stockholder correspondence to each member of the nominating and corporate governance committee, except for communications that are (a) advertisements or promotional communications, (b) solely related to complaints by users with respect to ordinary course of business customer service and satisfaction issues or (c) clearly unrelated to our business, industry, management or board or committee matters.

Director compensation is determined by our board following a recommendation from our compensation committee. Only the directors who our board determines to be independent directors receive compensation for their service.

On August 6, 2019, our board, upon the recommendation of the compensation committee, adopted a director compensation program that set compensation for our independent directors for service during the one year periods commencing at the Company’s annual shareholders’ meeting in 2019, 2020 and 2021. For 2021, each independent director received an annual cash retainer fee for board services and a grant of shares of restricted stock. The cash retainer fee consisted of a fixed cash payment of $72,000. The shares of restricted stock (“Shares”) had a value equal to $120,000, based on the market value of the Company’s stock. The Shares are subject to forfeiture and transfer restrictions until the date of the annual shareholders’ meeting taking place in the year after which the independent director received such Shares. Additional annual cash retainer fees were paid to each individual serving the Board in one of the following capacities.

The compensation committee periodically reviews our director compensation policy with the primary objective of matching compensation levels to the relative demands associated with serving on our board and its various committees.

Directors who are not classified as independent directors by our board do not receive any compensation for their service as directors on our board. We reimburse our non-employee directors for travel and other reasonable out-of-pocket expenses incurred in attending meetings of our board and its committees.

The following table summarizes compensation earned by our non-employee directors for the fiscal year ended December 31, 2021. Mr. Nicolás Galperin receives no compensation for his service on the board, in accordance with our policy not to compensate non-independent directors, and is not included in this table. Mr. Sanders became a member of our board in 2022 and so is not included in this table.

Our board has adopted a code of business conduct and ethics that applies to our officers, directors and employees. Among other matters, our code of business conduct and ethics is designed to deter wrongdoing and to promote:

Our audit committee must approve any waiver of the code of business conduct and ethics for our executive officers or directors, and any waiver shall be promptly disclosed. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the code of business conduct and ethics applicable to our chief executive officer and chief financial officer by posting the required information on our investor relations section of our website at http://investor.mercadolibre.com.

We believe it is important that our stockholders understand our governance practices. In order to help ensure the transparency of our practices, we have posted information regarding our corporate governance procedures on our investor relations website at http://investor.mercadolibre.com.

We have an anonymous and confidential whistleblower hotline for employees and third parties to report illegal or non- ethical behaviors. Complaints received through the hotline are analyzed and investigated by a compliance team appointed by the Head of Risk and Compliance to that effect. If the investigation confirms any wrongdoing, a report is issued with a recommendation of corrective actions that aim to remedy the situation and/or identify and control any other irregularities. In turn, the Company’s Management will follow the recommendations in the report by implementing those remediate actions.

NASDAQ rules require listed companies to have a board of directors with at least a majority of independent directors. Under NASDAQ’s rules, in order for a director to be deemed independent, our board must determine that the individual does not have a relationship that would interfere with the director’s exercise of independent judgment in carrying out his or her responsibilities as a director of our Company. As part of our corporate governance guidelines, our board has adopted guidelines setting forth categories of relationships that it has deemed material for purposes of making a determination regarding a director’s independence. On an annual basis, each member of our board is required to complete a questionnaire designed to provide information to assist our board in determining whether the director is independent under NASDAQ rules and our corporate governance guidelines. Our board has determined that each of Messrs. Calemzuk, Vázquez, Sallouti, Aguzin, Dubugras, Sanders, Malk and Ms. Segal, is independent under the listing standards of NASDAQ and our corporate governance guidelines. Our board has determined that Ms. Petroni will also be considered an independent director if she is elected at the Annual Meeting. Our governance guidelines require any director who has previously been determined to be independent to inform the chairman of our board and our corporate secretary of any change in circumstance that may cause his or her status as an independent director to change.

We expect our directors, executives and employees to conduct themselves with the highest degree of integrity, ethics and honesty. MercadoLibre’s credibility and reputation depend upon the good judgment, ethical standards and personal integrity of each director, executive and employee. In order to better protect MercadoLibre and its stockholders, we periodically review our code of business conduct and ethics to ensure that it provides clear guidance to our directors, executives and employees.

Our directors and employees (including officers) and any of their designees are prohibited from engaging in hedging transactions with respect to Company securities, including through the use of derivative instruments or through the establishment of a short position in the Company’s securities. In addition, directors and employees (including officers) and any of their designees are prohibited from pledging Company securities as collateral for a loan or from holding Company securities in a margin account.

We have entered into indemnification agreements with each of our directors and executive officers that obligate us to indemnify them to the fullest extent permitted by Delaware law.

The board has delegated to the audit committee the responsibility to review and approve all transactions or series of transactions in which we or a subsidiary is a participant, the amount involved exceeds $120,000 and a “related person” (as defined in Item 404 of Regulation S-K) has a direct or indirect material interest. As set forth in the audit committee charter, transactions that fall within this definition will be referred to the audit committee for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances, the audit committee will decide whether or not to approve the transaction and will approve only those transactions that are in the best interests of our Company.

Based solely upon review of the copies of such reports furnished to us or prepared by us and written representations that no other such reports were required, we believe that during the period from January 1, 2021 through December 31, 2021, all Section 16(a) filing requirements applicable to our officers, directors and greater-than-10% beneficial owners were complied with on a timely basis, with the exception of one transaction for Emiliano Calemzuk that was reported on a Form 4 filed on June 14, 2021.

Except as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares shown as beneficially owned by the stockholder. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of the date of this proxy statement are considered outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless indicated otherwise in the footnotes, the address of each individual listed in the table is c/o MercadoLibre, Inc., WTC Free Zone Dr. Luis Bonavita 1294, Of. 1733, Tower II Montevideo, Uruguay, 11300.

The Executive Summary below provides an overview of our performance during 2021 and its correlation to our compensation decisions and practices.

At the 2021 Annual Meeting of Stockholders, stockholders approved our 2020 advisory vote on executive compensation with approximately 86.34% of the votes cast in favor. We believe that strong support of our stockholders for the 2021 say-on-pay vote proposal indicates that our stockholders are generally supportive of our approach to executive compensation. In the future, we will continue to consider the outcome of our say-on-pay votes and other stockholder feedback when making compensation decisions regarding our named executive officers.

As discussed in more detail below, our 2021 executive compensation program is comprised of three different compensation elements:

In making its compensation decisions for the 2021 performance year, the compensation committee recognized our Company’s 2021 results and the contributions and accomplishments of the named executive officers to our continuing growth story. The following is a summary of the highlights of our 2021 executive compensation program:

Our compensation committee reviews and sets all compensation programs applicable to our executive officers and directors, our overall compensation strategy for all employees, and the specific compensation of our executive officers on an annual basis. In the course of this review, the compensation committee considers our current compensation programs and whether to modify them or introduce new programs or elements of compensation in order to better meet our overall compensation objectives. The compensation committee has the authority to select, retain and terminate special counsel and other experts (including compensation consultants), as the committee deems appropriate. Our compensation committee has, from time to time, engaged compensation consultants to assist the compensation committee in reviewing and developing recommendations related to fixed and performance-based compensation for our named executive officers as well as the market terms for our LTRP agreements.

While the compensation committee determines our overall compensation philosophy and sets the compensation of our executive officers, it looks to our chief executive officer and the senior vice president of human resources and the compensation consultants retained by the committee, if any, to work within the compensation philosophy to make recommendations to the compensation committee with respect to both overall guidelines and specific compensation decisions. Each of our chief executive officer and our senior vice president of human resources provides the board and the compensation committee with their perspectives on the performance of our executive officers as part of the annual personnel review and succession planning discussions, and recommends to the compensation committee specific salary amounts for executive officers, other than the chief executive officer, and recommendations on other compensation programs, which the compensation committee considers before making final compensation determinations. Our senior vice president of human resources works closely with the chairman of our compensation committee and attends certain compensation committee meetings to provide perspectives on the competitive landscape and the needs of the business, information regarding our performance, and technical advice.

The compensation committee establishes compensation levels for our chief executive officer on its own or in consultation with the compensation consultants it retains, if any, and our chief executive officer is not present during any of these discussions.

To set total compensation guidelines, the compensation committee reviews market data of companies against which the compensation committee believes our Company competes for executive talent. The committee believes that it is necessary to consider this market data in making compensation decisions in order to attract and retain top-notch executive talent.

With the aim of gaining accuracy in our process of compensation benchmarking, in 2020, we revisited and introduced some minor changes to our previous compensation peer group based on public information available about both size of revenues and market capitalization of each selected company, resulting in a list of companies that we considered when analyzing and making decisions relating to our 2020 compensation process. We continued to look to the same companies with respect to our 2021 compensation process. The companies include: Facset, Twitter, IBM, eBay, NortonLifeLock, Block, Fiserv, Activision Blizzard, Service Now, Citrix Systems, Intuit, Vmware, Verizon, NetApp, Workday, Electronic Arts and Booking Holdings.

We also participate and analyze different surveys of market compensation practices in our industry and broadly across all industries. To determine 2021 executive officer compensation, our compensation committee takes into consideration information about compensation peers and market survey to craft competitive compensation packages appropriate for our particular executives.

The following table summarizes the various elements of compensation paid to our named executive officers, in each of 2021, 2020 and 2019. Due to the SEC’s reporting requirements, the information set forth in the table below may not correspond with the amounts included in the table under the caption “Summary Compensation Table” below. However, we believe the following summary to be a more accurate reflection of the compensation actually paid in each of these years to our named executive officers.

Base salaries for our named executive officers are established based on the scope of their responsibilities and individual experience, taking into account competitive market compensation paid by the above peer companies for similar positions. Base salaries are reviewed at least annually for merit increases and cost of living adjustments, and adjusted from time to time to realign salaries with market levels based on the peer review and after taking into account individual responsibilities, performance and experience.

In reviewing base salaries for 2021, the compensation committee considered the comparative market data previously mentioned. The committee believes that each named executive officer’s salary level is appropriate in light of his roles and responsibilities within our Company.

In addition to base salaries, each of our named executive officers is eligible to receive annual cash bonuses. The compensation committee uses annual cash bonuses to compensate named executive officers for achieving short-term financial and operational goals and, in the case of our named executive officers other than our president and chief executive officer, for achieving individual annual performance objectives during the preceding fiscal year. These objectives are generally established in the first half of the year and vary depending on the individual named executive officer, but relate generally to financial and operational targets as well as a cultural alignment assessment carried out by the chief executive officer for the rest of the named executive officers. If established objective thresholds for the annual corporate performance period are not met, the executive does not receive a bonus under our annual cash bonus program for the year. After the end of each fiscal year, our actual corporate performance is compared to the pre-determined objectives established by our board of directors during the prior year and an individual performance multiplier is applied to determine the annual cash bonus award payout.

For 2021, the compensation committee selected the following as the corporate performance (the “Consolidated Corporate Performance”) measures:

The Consolidated Corporate Performance measure is calculated as a weighted average of the financial metrics described above (as set forth below in “Weighting of 2021 Annual Bonus Performance Measures”), which are converted from the local currency into U.S. dollars at the previous year’s applicable exchange rate, in order to mitigate the impact of fluctuations in local currencies on the Company’s operational performance.

The following table describes the components of each named executive officer’s 2021 annual bonus and the percentage weight of each element:

The following table sets forth the target levels for the various performance metrics (the “Minimum Eligibility Conditions”) included in the Company performance goals for 2021 and actual performance realized against those targets:

The compensation committee makes annual grants of long-term incentive awards to focus its executives on the Company’s long-term goals, in particular its share growth. The LTRP is designed to assist us in the retention of key employees that have valuable industry experience and developed competencies. Subject to continued employment through each payment date, the LTRP is paid as follows:

The following table sets forth the nominal target value of the 2021 LTRP bonus and the portion of the 2021 LTRP bonus paid out for 2021 for each named executive officer:

The compensation committee of the board as of the filing date of this Proxy Statement has reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement with management and, based on such review and discussions, the compensation committee recommended to the board of directors that it be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as incorporated by reference from this proxy statement.

When structuring our overall compensation practices for our employees generally, consideration is given as to whether the structure creates incentives for risk-taking behavior and therefore impacts our risk management practices. Attention is given to the elements and the mix of pay as well as ensuring that employees’ awards align with stockholders’ value.

The compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The compensation committee has assessed our compensation policies and practices for our employees in 2021 and has concluded that these policies and practices ensure appropriate levels of risk-taking, while avoiding unnecessary risks that could have a material adverse effect on our Company.

The following table sets forth compensation information for the years ended December 31, 2021, 2020 and 2019 for our named executive officers.