Good morning, ladies and gentlemen, and welcome to PayPal Holdings, Inc. 2017 Annual Stockholders Meeting. I would now like to introduce you to Mr. John Donahoe, Chairman of the Board of PayPal Holdings, Inc. Mr.
Donahoe, you may begin.
Good morning, and welcome to the 2017 Annual Stockholders' Meeting of PayPal Holdings, Inc. I'm John Donahoe, Chairman of the Board of PayPal Holdings, Inc, and I'll serve as Chair of the meeting this morning. We're excited that our Annual Shareholders Meeting is again being conducted through a live webcast. By holding a virtual meeting, enabling shareholders from around the world to attend and participate in our annual meeting, which we believe allows for greater access and participation. We're conducting this meeting in accordance with our bylaws and the meeting's rules, conduct and procedures.
The meeting rules and agenda are available on the meeting website. As a reminder, stockholders attending the virtual meeting can vote their shares online from now through the closing of the polls by logging into the meeting website as a stockholder and clicking on the Vote Here button on your screen. If you have previously voted by proxy and do not wish to change your vote, your vote will be cast as you previously instructed and no further action is required. We'll begin by attending to the formal business of the meeting. After the formal meeting is adjourned, Dan Shulman, our President and CEO, will provide a short presentation on the business.
And following that, we will hold a question and answer session. We've received several questions that were submitted by our stockholders before today's meeting that we will address during the Q and A session. Shareholders logged into the meeting website will be able to submit questions by typing them into the text box on the meeting website through the end of the Q and A session. In addition, if you have a specific question about a specific product or your consumer or merchant account, please feel free to send those questions to the e mail address stockholdercustomerquestionspaypal.com. Finally, please note that the meeting is being recorded and will be available for replay on the meeting website for 90 days.
With that said, I'd like to introduce the other Board members who are participating in today's meeting. Dan Shulman, who serves as our President and Chief Executive Officer Wences Esarres Jonathan Cristodoro Dave Dorman Belinda Johnson, David Moffett and Frank Urie. In addition to Dan Schulman, other members of our senior leadership team who are also participating include Louise Pentland, Chief Business Affairs and Legal Officer John Rainey, Chief Financial Officer Brian Yamasaki, Company Secretary and Gabrielle Rabinovich, Investor Relations. Representatives of PwC, our independent auditor, are present today and will be available to answer appropriate questions during the question and answer session. I would now like to call the 2017 Annual Stockholders Meeting to order.
I'll be serving as Chair of the meeting, and Brian Yamasaki will serve as the Secretary of the meeting.
Thanks, John. This meeting is held pursuant to the notice of annual meeting that we began mailing on April 13, 2017, to all stockholders of record on April 5, 2017. We have received an affidavit of mailing from Broadridge indicating that notice of the meeting has been duly given. A copy of our proxy statement is available on PayPal's Investor Relations website and the Securities and Exchange Commission's website at www.sec.gov. The Inspector of Elections has confirmed that proxies have been received from more than 87% of the approximately 1,200,000,000 shares of the company's outstanding common stock entitled to vote.
I declare that there is a quorum present. Accordingly, the meeting is duly constituted, and we may now proceed with the business of the meeting. As John indicated in his introduction, the polls are open for voting. We will close the polls after the proposals have been presented. There are 6 items of business to be voted on at this meeting.
The first item of business is the election of 9 Director nominees to the Board of Directors, each to hold office until the 2018 Annual Meeting of Stockholders or until the successors are duly elected and qualified. The nominees for election to the Board of Directors are: Juan Sephazares, Jonathan Crisadoro, John Donahoe, David Dorman, Belinda Johnson, David Moffett, Dan Schulman and Frank Urie. The second item of business is an advisory vote to approve the compensation of our named executive officers. The 3rd item of business is the approval of the amendment to our amended and restated certificate of incorporation regarding proxy access. The 4th item of business is the ratification of the appointment of PricewaterhouseCoopers, LLP as our independent auditor for 2017.
Going back to the first item of business, that's that one director one additional director nominee for election. Gail McGovern is also up for election on the slide. The next item of business is the consideration of 2 stockholder proposals, if properly presented at this meeting. Please note that the comp trailer of the State of New York, Thomas P. DeNapoli, trustee of the New York State Common Retirement Fund, has agreed to withdraw its stockholder proposal on the preparation of a sustainability report in exchange for our agreement to enhance our sustainability disclosure as part of our ongoing sustainability initiatives.
Accordingly, that proposal will not be voted on at this meeting. The 2 stockholder proposals and the company's opposition statements are provided in our proxy statement. A representative from each of the proponents will have 5 minutes to present their stockholder proposal. The first stockholder proposal was submitted by Mr. James McRitchie and Ms.
Myra K. Young. Mr. John Chevedden will be presenting the proposal. Operator, please open the line for Mr.
Chevedden.
Mr. Chevedden, your line is now open and you may proceed.
Hello. Good morning. This is John Chevedden. Are you able to receive me? Perfectly.
So the proposal number 5 is the right to act by written consent submitted by James McRitchie and Myra K. Young. Shareholders request that our Board of Directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent. This includes shareholder ability to initiate any topic for written consent within applicable law.
A shareholder right to act by written consent and to call a special meeting are 2 complementary ways to bring an important matter to the intention of both management and shareholders outside the annual meeting cycle. Both are associated with increased governance quality and shareholder value. This proposal should be considered, especially in the context of our current governance rules and practices, which leave a number of opportunities for improvement. For instance, we do not have an independent Board Chairman. We have $13,000,000 in executive pay to 1 person in a year, and our executive pay was only approved by 87% when this figure routinely gets well over 90%.
Only 4 there were only 4 board meetings in a whole year. We don't have confidential voting, so management can bug shareholders to change their votes, especially on sensitive items like executive pay. And only 20 shareholders can participate in shareholder proxy access. And the company went to an out a big outside law firm to prevent the Sibley firm to prevent shareholders from voting on increasing the number of participants in shareholder proxy access beyond 20. 20 participants is like shareholder proxy access for the 1% who could care less in most cases.
So there's a lot of room for improvement and in our governance rules and practices, and this is to ask shareholders to vote for our right to act by written consent to protect shareholder value and take one step forward in improving our corporate governance. Thank you.
Thank you, Mr. Shevedden. The Board of Directors recommends a vote against this stockholder proposal for the reasons set forth in our proxy statement. The 2nd stockholder proposal was submitted by Amalgamated Bank's Longview Large Cap 500 Index Fund and Baldwin Brothers, Inc. On behalf of Dillon Sage.
Mr. Cornish Hitchcock will be presenting the proposal. Operator, please open the line for Mr. Hitchcock.
Mr. Hitchcock, your line is now open and you may proceed.
Thank you very much, Mr. Yamasaki. By way of introduction, the Longview Funds are long term shareholders of PayPal and we along with our co filer, Baldwin Brothers, look forward to a productive long term relationship with the company. I'm not going to read the proposal. It's fully set out in the proxy.
In a nutshell, what we're doing is asking the Board to evaluate the feasibility of this company achieving net zero emission of greenhouse gases by the year 2,030, consistent with the goals of the landmark 2015 Paris agreement on climate change. Differently put, we're asking management and the Board to consider the long term impact of climate change on the company and what steps should be taken to address the issue, not just as a day to day operations issue, but as a matter of basic corporate policy. In our view, the need to respond to the challenges by the Paris Agreement will be a key element for this company and every company seeking to achieve long term sustainability and long term shareholder value. PayPal has been a leader in this industry in its brief history. We urge the company to be a leader on this issue as well.
Thank you.
Thank you, Mr. Hitchcock. The Board of Directors recommends a vote against the stockholder proposal for the reasons set forth in our proxy statement. That concludes the presentation of the items of business that you've been asked to vote on. The polls are now closed.
I have received the preliminary voting results from the Inspector of Elections based on the proxies received as of the opening of the polls at today's meeting. The preliminary voting results are as follows: each of the 9 director nominees has been duly elected The compensation of our named executive officers has been approved by advisory vote. The amendment to amended and restated certificate of incorporation has been approved. The appointment of PricewaterhouseCoopers LLP as our independent auditor for 2017 has been ratified. The proposal regarding stockholder action by written consent without a meeting has been rejected and the proposal regarding the preparation of a net zero greenhouse gas emissions report has been rejected.
All votes are subject to final counts certified by the Inspector of Elections. We will report final vote results on Form 8 ks within 4 business days.
Thank you, Brian. There being no further business to come before the meeting, the 2017 Annual Meeting of the Stockholders of PayPal Holdings Inc. Is now adjourned.
Dan Shulman will now give a short presentation followed by our question and answer session. As a reminder, today's presentation may contain forward looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. Actual results may differ materially from these forward looking statements due to various risks and uncertainties about our business, which are described in our filings with the Securities and Exchange Commission, including our annual report on Form 10 ks and subsequent quarterly reports on Form 10 Q. We assume no obligation to update any forward looking statements. With that, I will turn the call over to Dan Shulman.
Thank you, Brian, and thanks to all of you for taking the time to join us today on the webcast. It's great to be here with you as we approach the 2nd anniversary of our separation from eBay. We've accomplished a lot in our 1st 22 months as an independent company. But what excites us is the tremendous opportunity still in front of us as we help our customers take full advantage of the mobile revolution. At PayPal, we are aligned around one central vision, to become the world's largest open digital payments platform.
We want to help the 16,000,000 merchants on our platform get closer to their customers as the retail world morphs towards digital commerce. And for our consumers, we want to democratize access to financial services so that the roughly 2,000,000,000 people across the globe who live outside the traditional financial services industry can join and thrive in the digital economy. These are big and far reaching goals, but we are making steady and tangible progress. We will continue to increase the reach, breadth and quality of experiences that consumers and merchants have on our platform. Our unwavering commitment to being a customer champion has opened the door for close partnerships with companies across our ecosystem.
We continue to strengthen and forge strategic alliances with leading brands around the world. In 2016, we signed major strategic deals with Visa, Mastercard, Alibaba, Vodafone, Facebook and Citi. These partnerships have helped reshape the competitive landscape. It's hard to overstate the difference in the relationships we now have with companies across multiple sectors who were viewed as potential competitors. We are now collaborating as strong and supportive allies to create value for our mutual customers.
We have continued to forge new partnerships in 2017, and this will remain a strategic focus for us. Our success in executing against our vision is reflected in our financial results. 2016 was our 1st full year as an independent company and is the year that we truly started to transition into the new PayPal. In 2016, we added 18,000,000 new accounts, greatly extended our leadership in mobile commerce, launched innovative products like OneTouch for both consumers and merchants and generated strong growth in revenues, processing volumes and total transactions of 20% plus on an FX neutral basis. I'm pleased to say that momentum has carried over into 2017.
Last month, we announced our Q1 results. As you can see on this slide, we posted double digit growth in every key category. I'd point out that our 6,000,000 net new actives is the largest organic quarterly increase in this important metric over the past 3 years. We ended the quarter with 203,000,000 active accounts now transacting on our platform and now expect our net adds to increase by more than $20,000,000 in 2017. At the same time, our transactions per active account continue to increase, growing in Q1 to 32, up from 28 a year ago.
We also generated $603,000,000 in free cash flow and delivered $0.44 of non GAAP earnings per share, which was $0.02 above the high end of our guidance, as we are beginning to realize sustainable cost benefits as a result of our increasing scale economics. We have accomplished much in the past 2 years, but we realize we still have much to accomplish in order to capture the tremendous opportunities ahead of us. I want to end by thanking all of our employees for their efforts, our customers for their trust and our shareholders for your support. I'd like to now open the floor to any questions, turn it over to Gabrielle.
You may continue to submit questions for the Q and A session by typing them into the text box on the meeting website screen through the end of the Q and A session. We will attempt to answer as many questions as time allows, and only appropriate questions will be addressed. The first question is, what is the compensation plan for the Board?
Thanks, Gabriel. Our non employee directors receive an annual retainer and equity award for their Board service. The annual retainer is payable in cash or stock at the Director's election. Our Director compensation plan is described more fully in our proxy statement.
Our next question is, why is everyone on this board from eBay? We need some new, young, more diverse thinkers to make sure management is doing what is needed to increase value. The stock price is stagnant.
First off, I would like to highlight that a majority of our current directors either have no connection to eBay or served as directors of eBay for a few months prior to joining the PayPal Board at separation. We agree that the company benefits when there's a mix of experienced directors with a deep understanding of the company and newer directors who bring a fresh perspective and new ideas. Our Board members have complementary experience and skill sets, which contribute to strong Board dynamics and effective Board oversight.
Our next question is following our letter of November 16, 2016, representing a group of socially responsible investors with long term holdings in PayPal who invest a total of $15,800,000,000 and following petition signed by over 180,000 individuals worldwide, we are concerned about PayPal's exposure to serious human rights and controversy risks over its uneven operation in Israel and Palestine. PayPal provides services to Israeli settlers living in the occupied Palestinian territories counter to international law. At the same time, Palestinian residents in the same areas do not have access to PayPal Merchant Services. This disparity translates into a discriminatory practice and represents a growing risk to the company's reputation and social license in the region. How does PayPal respond to this growing risk?
What steps have been taken in response to requests from the Palestinian growing high-tech sector inviting PayPal to join the Palestinian market.
Thank you, Gabriel. We very much appreciate the outreach and interest from groups working to bring PayPal services to Palestine. The status of our service for Palestinians in the Palestinian territories or anywhere else is not politically motivated. PayPal's ambition is for everyone to have access to our services for digital payments and commerce in accordance with applicable regulatory requirements. We are in ongoing dialogue with advocates and key stakeholders on this important issue because we ultimately hope to be able to address the risk, compliance, regulatory and resource allocation issues to properly serve customers in the region and other nations where PayPal is not yet present.
We continuously work to develop strategic partnerships, address business feasibility, regulatory and compliance needs and requirements and acquire the necessary local authority permissions for new market entries. Addressing these matters takes some time, but they are critical to our business and necessary to achieving the high service and regulatory standards we hold ourselves to in every market where we operate. While we do not have any timelines or announcements to make, PayPal will continue to meet with stakeholders to learn more about varying perspectives and factors that may affect our planning and market entry. Thank you.
Thanks, Dan. The next question is, please announce at the end of the meeting the number of shareholder attendees, the number of director attendees, the number of management attendees, the number of separate questions asked by shareholders, the number of separate answers by management the number of media attendees.
Thanks, Gabriel. Following the meeting, we'll post this information on our annual meeting website.
Thanks, Brian. The next question is, what were the topics and who were the proponents of the Rule 14(8) proposals submitted for this 2017 meeting that were not included in the proxy?
Mr. Jon Chiban submitted a 14.8 stockholder proposal with respect to stockholder aggregation limits under our proxy access provisions. The Securities and Exchange Commission granted our request for no action relief to exclude this proposal from our proxy materials.
Thanks, Brian. The next question is, will all the submitted questions for this meeting be published?
Yes, they'll be published following the meeting on our Annual Meeting website.
The next question is, were there special effort to force higher the votes in support of executive pay as high as $13,000,000 for at least one executive?
No. No special efforts were made to force a higher vote. We received support from over 95% of the votes cast for 2016 CN Pay vote.
Thanks, Brian. At this time, we have no further questions from our stockholders. So that concludes the question and answer portion of the meeting. I'll turn the meeting back to Dan to conclude.
Thanks, Gabriel. I want to close by thanking everybody who participated in the virtual meeting and those stockholders who submitted questions. We appreciate them. Hope that everybody has a great day. Thank you very much.