8-KLeadership ChangesExhibits & Filings

MERCADOLIBRE INC 8-K Report, Executive Changes (Aug 5, 2011)

Filed August 5, 2011For Securities:MELI

Summary

MercadoLibre, Inc. (MELI) filed an 8-K on August 4, 2011, detailing its finalized executive compensation program for 2011. The report outlines the performance criteria for annual cash bonuses and introduces the 2011 Long-Term Retention Plan (2011 LTRP). The compensation structure emphasizes a mix of company-wide financial performance metrics such as net revenue minus bad debt, net income, and adjusted free cash flow, alongside individual qualitative assessments. Notably, the company's Venezuelan operations are considered separately for bonus calculations, highlighting its strategic importance and potential volatility. Key changes include the establishment of specific performance objectives for annual bonuses and the adoption of the 2011 LTRP, which links a portion of executive pay to the company's stock performance. This long-term incentive plan features a fixed cash payment component plus a variable component tied to the average stock price over the last 60 trading days of each year, compared to the 2010 average stock price of $65.42. The plan aims to retain key executives while aligning their interests with shareholder value through stock price appreciation.

Key Highlights

  • 1MercadoLibre finalized its 2011 executive compensation program, including performance criteria for annual cash bonuses and the adoption of the 2011 Long-Term Retention Plan (2011 LTRP).
  • 2Annual cash bonuses for named executive officers are tied to General Company Performance Objectives (net revenues minus bad debt, net income, adjusted free cash flow) and Individual Qualitative Assessments.
  • 3A portion of the executive bonuses is specifically linked to the performance of MercadoLibre's Venezuelan operations, indicating its distinct importance or risk profile.
  • 4Osvaldo Giménez, SVP of Payments, has a unique bonus structure with a significant portion (25%) tied to MercadoPago business performance (penetration, off-platform revenue/volume).
  • 5Minimum eligibility conditions, requiring at least 80% achievement of General Company Performance Objectives and Individual Qualitative Assessments, must be met for any bonus payout.
  • 6The 2011 LTRP is an 8-year cash-based incentive plan, with payments commencing in 2012. It includes a fixed annual payment and a variable component linked to MercadoLibre's stock price relative to a 2010 baseline of $65.42.
  • 7The 2011 LTRP's variable component offers potential upside for executives if the company's stock price increases, aligning executive incentives with shareholder value.

Frequently Asked Questions

The 2011 executive compensation program consists of base salary, annual cash bonuses, and the 2011 Long-Term Retention Plan (2011 LTRP). The annual cash bonuses are determined by company-wide financial metrics (net revenues minus bad debt, net income, adjusted free cash flow), individual performance assessments, and for specific officers, business unit performance (like MercadoPago for Mr. Giménez). The 2011 LTRP is an 8-year cash payout plan with a fixed component and a variable component linked to the company's stock price.

The annual cash bonus is calculated based on a weighted average of performance metrics. These include General Company Performance Objectives (net revenues minus bad debt, net income, adjusted free cash flow), with specific weightings for operations excluding Venezuela and for Venezuelan operations. A portion is also based on individual performance (360-degree qualitative assessment). Mr. Giménez's bonus also incorporates MercadoPago performance metrics.

To be eligible for any bonus in 2011, executives must meet 'Minimum Eligibility Conditions.' These include the company achieving at least 80% of its target General Company Performance Objectives for the year, the executive scoring at least 80% on their Individual Qualitative Assessment, and the executive's total performance tally equaling at least 80%. For Mr. Giménez, there's an additional condition that the MercadoPago business must achieve at least 70% of its target net revenues.

The 2011 LTRP provides a cash incentive over eight years, starting in 2012, provided the executive meets the same Minimum Eligibility Conditions as for annual bonuses. Each year, executives receive a fixed cash payment (6.25% of their target LTRP bonus) and a variable cash payment. The variable payment is calculated as 6.25% of the target bonus multiplied by the ratio of the 'Applicable Year Stock Price' (average closing price of the last 60 trading days of the year) to the '2010 Stock Price' ($65.42). This structure allows the total payout to exceed or fall short of the target based on stock performance.