Pattern of Misrepresentation and Self-Serving Executive Behavior (critical) A special report by Reuters alleges a pattern of misrepresentations and self-serving behavior among top Axon executives. This includes misrepresenting the company's founding story and failing to fully disclose lavish executive compensation and perks in regulatory documents, leading governance experts to describe it as a 'chorus of self-dealing transactions.'. Misrepresentation of Company Founding Story by CEO Rick Smith (critical) CEO Rick Smith repeatedly claimed the company was founded due to the deaths of two high school friends, Todd Bogers and Cory Holmes, who were 'shot and killed.' Family members and a close friend of the deceased stated that Smith was not friends with the young men, did not attend their funeral, and that the company 'profited off that' without permission. This alleged fabrication was cited in company promotions and a 2020 SEC filing.. Multiple Antitrust Lawsuits and Regulatory Scrutiny (critical) Axon faces multiple antitrust challenges. Although the company secured a unanimous Supreme Court victory in April 2023 regarding jurisdiction (allowing constitutional challenges to the FTC structure in federal court, leading to the FTC dismissing its administrative case), Axon remains the target of other litigation, specifically a class-action lawsuit ('In Re Axon VieVu Antitrust Litigation') brought by purchasers and a lawsuit filed by a second U.S. town, both alleging violations of antitrust laws related to its market dominance and the VieVu acquisition.. Excessive Executive Compensation and Misleading Disclosure (critical) Axon publicly stated its compensation philosophy was to pay executives near the 50th percentile of peers. However, internal analyses showed the top five executives were paid at the 90th percentile or greater. This disparity and the failure to disclose how far pay exceeded benchmarks after 2018 were noted as major red flags by governance experts.. Accelerated Executive Stock Payouts Based on Unrealized Gains (high) Top executives cleared an 'audacious' 10-year financial goal in just over five years, partly facilitated by a $41 million *unrealized* gain from a stake in a public safety startup in 2021. This allowed executives, including CEO Smith (who claimed $571 million), to unlock $844.5 million from the stock plan significantly ahead of schedule, suggesting 'easy goals' or poor forecasting.. Undisclosed Luxury Perks for President Josh Isner (Aston Martin) (high) Axon purchased an Aston Martin sports car (MSRP between $216,000 and $241,000) for President Josh Isner in lieu of a cash bonus four years ago. The company disclosed taxes paid related to the vehicle but did not divulge the luxury make or the price tag to investors in SEC filings, potentially violating disclosure requirements for perks exceeding $10,000.. Undisclosed Company Sponsorship tied to Executive's Fraternal Society (high) Axon spent hundreds of thousands of dollars in 2022 and 2023 sponsoring luxury viewing areas (costing $155,000+ to $205,000+) and providing free security (150 drone flights, command centers) for the Waste Management Phoenix Open golf tournament. This event is run by The Thunderbirds, a fraternal society where Axon President Josh Isner is a leading member (Director). This expenditure was not disclosed to the SEC, despite likely exceeding the $120,000 disclosure threshold for transactions where an executive has a material interest.. Employment of CEO's Wife Not Disclosed in SEC Filings (medium) CEO Rick Smith's wife, Brenda Smith, was employed by Axon as 'CEO Support' or 'Personal Assistant' according to Federal Election Commission documents. This arrangement is discouraged by Axon's code of ethics for supervisor/subordinate relationships and was not reported to investors via SEC disclosures.. Controversial Use of AI Technology (Draft One) Opposed by EFF (medium) Axon's generative AI product, Draft One, which assists with producing written police reports using body-worn audio recordings, is opposed by the Electronic Frontier Foundation (EFF). The EFF argues the product is 'Designed to Defy Transparency,' raising public concern regarding the ethical deployment and auditing of Axon's new AI solutions in public safety.. Axon’s Broad License to User-Uploaded Evidence Data (medium) Evidence.com's terms of service grants Axon a 'non-exclusive, transferable, irrevocable, royalty-free, sub-licensable, worldwide license' to use photos and videos uploaded by users. A Californian criminal defense lawyer noted in 2017 that this broad license may violate California privacy law, especially concerning data involving juveniles.. Ethics Board Resignations Over Taser Drone Proposal (high) In June 2022, Axon proposed a plan for Taser-armed drones to stop school shootings. Axon's institutional review board (IRB) expressed disagreement and issued a unanimous statement of concern, leading to the resignation of nine members of the board.