Target Ltd: Microstrategy Inc. (MSTR)
Perfect. I’ll develop a human-style written governance audit report on MicroStrategy, grounded in primary sources (e.g., 10-Ks, DEF 14A, ESG reports, committee charters), comparing the company’s current governance to its 2019 structure.
The audit will:
I’ll get started on assembling the full report and let you know when the draft is ready for your review.
Prepared by: BarryLaw
Date: 4th April 2025
This report presents an eight-page governance audit of MicroStrategy Incorporated (“MicroStrategy”), examining the company’s corporate governance practices in 2024–25 and comparing them to 2019. The analysis is grounded in primary source documents – including SEC filings (10-K annual reports, DEF 14A proxy statements), committee charters, and disclosed policies – with direct excerpts cited. We assess MicroStrategy’s governance through several key dimensions: board composition and independence, executive compensation, ownership structure and shareholder rights, recent controversies, financial reporting quali (printmgr file) (printmgr file)between 2019 and 2024 are highlighted and analyzed in context of significant events (such as MicroStrategy’s 2020 adoption of a Bitcoin asset strategy and leadership role changes in 2022) and evolving best practices. Throughout, we app (printmgr file)orate governance frameworks (agency theory, stakeholder theory, game theory, risk governance, earnings management, and Tricker’s governance principles) to evaluate the effectiveness of MicroStrategy’s governance and the rationale behind observed changes.
(Note: All citations refer to source documents; an Appendix of selected annotated excerpts is provided for reference.)
Board Size and Composition: As of 2024, MicroStrategy’s board consists of six directors, including Executive Chairman Michael J. Saylor (company founder and former CEO) and CEO Phong Q. Le, plus four independent directors. In contrast, in 2019 the board was slightly smaller with five members – Mr. Saylor and four independents – as Mr. L (Agency Theory.pdf) (Agency Theory.pdf)he board. The addition of Mr. Le as a director (upon becoming CEO in 2022) expanded the board and introduced a second management insider on the board, whereas previously Mr. Saylor was the sole inside director. Al (Skin in the game.pdf) (Skin in the game.pdf)4 (Stephen Graham, Jarrod Patten, Leslie Rechan, Carl Rickertsen) are independent, long-tenured members who also served on the 2019 board. Notably, the board has lacked gender or ethnic diversity both in 2019 and 2024 – all current directors are male, and the same was true in 2019. While Nasdaq’s recent rules encourage at least two diverse directors or an explanation, MicroStrategy’s 2024 proxy acknowledges a Board Diversity Policy and that diverse candidates were considered, but ultimately no change in board demographics occurred. This continuity suggests that despite external pressure for diversity, the controlling shareholder may have prioritized continuity and specific expertise over demographic diversity. Stakeholder theory would argue for more diversity to reflect a broader stakeholder base, yet MicroStrategy’s board composition reflects a shareholder-centric approach focused on known, trusted individuals.
Controlled Company Status and Leadership Structure: A pivotal aspect of MicroStrategy’s governance is Mr. Saylor’s voting control, which exceeds 50%. He holds a special class of high-vote stock (Class B shares) representing ~55.8% of total voting power. This qualifies MicroStrategy as a “controlled company” under Nasdaq rules. As a controlled company, MicroStrategy is exempt from certain corporate governance requirements, such as having a majority-independent board or separate independent nominating and compensation committees. In practice, MicroStrategy’s board has still maintained a majority of independent directors (four out of six) and an independent Compensation Committee, but it does not have a standalone Nominating Committee – the full board handles director nominations. This structure remained consistent between 2019 and 2024. In both periods (SEC rejects MicroStrategy‘s Bitcoin accounting practices: Report ) served as Chairman of the Board. However, a major leadership structure change occurred in August 2022: Mr. Saylor stepped down as CEO and transitioned to Executive Chairman, with Mr. Phong Le (previously President and CFO) becoming CEO and joining the board. Prior to this (including 2019), Mr. Saylor had combined the Chairman and CEO roles. The separation of these roles in 2022 was a response to the company’s s (Rik and corporate governance.pdf) (Rik and corporate governance.pdf)ossibly governance best practices. According to MicroStrategy’s announcement, splitting the roles enables the company to “better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business,” with Mr. Saylor focusing on innovation and Bitcoin strategy as Executive Chairman and Mr. Le empowered t (Rik and corporate governance.pdf) (Rik and corporate governance.pdf)operations” as CEO. This change aligns with agency theory and Tricker’s principles, which often favor separating oversight and execution roles to improve board monitoring and strategic focus. While Mr. Saylor remains an executive (not independent) Chairman, the move mitigated the concentration of power to some degree and acknowledged the distinct oversight needed for MicroStrategy’s unconventional Bitcoin strategy. The board did not appoint a lead independent director in 2024 (and likewise had none in 2019), explaining that independent directors meet in executive session and that given the controlled company status, the current structure provides sufficient “balance of management leadership and non-management oversight”. This rationale reflects a stewardship perspective (relying on trust in Saylor’s leadership) but carries agency risks since a strong independent counterweight is limited.
Expertise and Committees: MicroStrategy’s independent directors bring financial and industry expertise that supports both monitoring and advising functions. For example, Stephen Graham (director since 2014) is a finance executive designated as the Audit Committee’s “financial expert”, and Carl Rickertsen (director since 2002) has private equity experience and chairs t (2_Governance and management (tricker ch2).pdf) (2_Governance and management (tricker ch2).pdf)22†L67-L70】. These directors have remained on the board since 2019, providing continuity. The board’s committee structure in 2024 includes an Audit Committee, Compensation Committee, and an Investments Committee. The Audit and Compensation Committees are composed entirely of independent directors (as was also the case in 2019). The creation of the Investments Committee is a notable governance change since 2019, directly tied to MicroStrategy’s strategic pivot to Bitcoin. Formed in 2020, this committee is a two-member panel (Mr. Saylor and Mr. Graham) authorized to oversee and approve the company’s Bitcoin treasury acquisitions and dispositions. In 2023, for example, the Investments Committee acted ten times by unanimous written consent to approve Bitcoin transactions. By appointing Mr. Saylor as Chair of this committee and including one independent director (Graham), the board implemented a mechanism for more focused and timely oversight of this high-stakes investment strategy. This reflects a game-theoretic compromise: the controlling shareholder (Saylor) retains direct influence over Bitcoin decisions, but an independent voice is formally involved, potentially increasing transparency and minority shareholder confidence. In 2019, no such committee existed (as the company had not yet embarked on the Bitcoin strategy), so this represents a governance adaptation to a new risk profile.
In summary (Agency Theory.pdf) (Agency Theory.pdf)mains dominated by the influence of Mr. Saylor’s control, similar to 2019, but has evolved via role (Rik and corporate governance.pdf) (Rik and corporate governance.pdf)e innovation. The core of four long-tenured independents provides stability and institutional knowledge, though arguably at th (printmgr file) (Rik and corporate governance.pdf) and diversity. The changes undertaken – adding the CEO to the board, splitting CEO/Chair roles, and forming an Investments Committee – largely responded to strategic shifts and external expectations. These moves are consistent with Tricker’s view that the board must ensure the business is “well run and running in the right direction” even as strategy changes. They also illustrate agency theory in action: introducing structural checks (independent committee oversight, separate CEO) to balance the power of an entrenched founder and align decision-making with all shareholders’ interests. Still, as a controlled company, MicroStrategy’s governance can diverge from typical best practices (e.g. no nominating committee, no lead independent director) with relatively little shareholder pushback, since Mr. Saylor’s voting control insulates the board from activist pressures. The onus remains on the board’s sense of stewardship to safeguard minority shareholder inte (printmgr file) (printmgr file)xecutive Compensation and Incentives**
Compensation Philosophy and Governance: MicroStrategy’s approach to executive compensation reflects the company’s unique ownership structure and strategic objectives. The Compensation Committee (chaired by independent director Carl Rickertsen) oversees executive pay policies, both in 2019 and 2024. Despite (printmgr filed company exemption, the board elected to maintain an independent comp committee, which aligns with best practices for mitigat (printmgr file)ts (even though Mr. Saylor, as controlling shareholder, could theoretically override pay decisions through his board influence). The company’s philosophy emphasizes performance alignment and retention of key talent. However, the implementation of that philosophy differs notably between founder Michael Saylor and other executives.