People

The People

Governance grade: C+. A founder-CEO with 90.7% of the votes against 34.3% of the economics, growing related-party purchases (¥372M in FY2025), and a fresh founder-affiliated $120M convertible — capped by a credible audit chair and a recently dismissed IPO-era securities class action. The board is technically competent; structurally, it cannot meaningfully push back on the chairman.

Governance Grade: C+ — Founder controls 90.7% of votes; aligned but unchecked.

1. The People Running This Company

Six names matter. Three are full-time operators; three are independent directors. The bench is unusually thin for a NYSE-listed consumer group — there is no COO, no Chief Brand Officer, no head of international, and no successor in sight.

What to trust: Cheng's pedigree (Estée Lauder VP APAC R&D for 8 years) is the strongest external endorsement on the team — the skincare pivot in FY2024–25 is hers to lose. Yang is a serious operator with two other public-company directorships and a Vipshop track record covering the entire DTC era. Zhang as audit chair is an unusually high-quality appointment — sitting CFO of Sina, ex-Deloitte SEC partner, AICPA.

What to question: Huang has only one operating role pre-Yatsen (a five-year VP stint at a mid-tier cosmetics firm before founding the company at age 32). The HBS MBA was earned after founding Yatsen, not before. There is no public-company management experience prior to YSG. Alan Hao Zong, the newest independent director, shares both Huang's undergraduate institution (Sun Yat-sen University) and an HBS MBA — informal ties that an independent director nominee in a US-listed company would normally be vetted against.

2. What They Get Paid

Foreign-private-issuer rules let Yatsen disclose only aggregate compensation. The cash numbers are tiny by US peer standards — the real story is equity.

Read on pay: Aggregate cash is around ¥8M (~$1.1M USD) for all executive officers combined — that is one mid-level US VP's package. The chief economic incentive for everyone except the founder is the 2018 Option Plan: 216.4M of 249.2M authorized shares already granted at an exercise price of US$0.025 per ordinary share, against a market price near US$0.143/ordinary share. Every option is deeply in-the-money by roughly 5.7×, with no performance condition disclosed beyond service vesting.

This works for retention. It does not align pay with shareholder return — managers were going to make money whether the stock went to $1 or $5 from IPO levels. Performance-conditioned grants (RSUs tied to revenue, operating margin, or relative TSR) are conspicuously absent.

3. Are They Aligned?

This is where the report card splits in two: economically aligned, structurally not.

Ownership and control

The founder's economic stake (34.3%) gives him roughly ¥625M (~$92M) tied to the share price — meaningful skin in the game by any standard. But the dual-class structure means he could sell down to a sliver of economics and still control the company. Hillhouse and ZhenFund — both Series A/B insiders retained through IPO — have a combined 25.7% economic stake but only 3.6% of the vote. They are passengers, not co-pilots.

Insider trading

As a Foreign Private Issuer, Yatsen is exempt from Section 16 — there are no Form 4 filings to read. The cleanest substitute signal is that founder Class B ownership has not declined since IPO (still 600.6M shares, no conversions to Class A). The company has been an aggressive repurchaser — 819.9M Class A shares sit with the depositary/buyback program/employee trusts — which is shareholder-friendly if the price was discriminating, less so if it simply offset 216M of exercisable options.

Dilution

The 2018 Option Plan pool is 249.2M Class A; 216.4M already granted at $0.025. The 2022 Plan adds 1.5% / 1.0% annual evergreen on top. Outstanding ADSs total roughly 95M (1.9B ordinary shares ÷ 20), so the option overhang represents ~11% of the float on a fully-diluted basis — meaningful but not catastrophic, and partly offset by repurchases.

Related-party behavior — the live issue

Two flags here.

First, inventory and services purchased from companies "over which Yatsen exercises significant control" rose from ¥211M (2023) to ¥372M (2025) — a 76% increase in two years against revenue that is roughly flat. The 20-F does not name these counterparties or break out the nature of the goods/services. At ¥372M (~$53M), this is now around 9% of revenue routed through entities the company is also a shareholder of. The audit committee approves these in principle; the disclosure does not let an outside reader test the arm's-length pricing.

Second, on March 11, 2026 Yatsen signed a Note Purchase Agreement for ~US$120M of RMB-denominated convertible senior notes plus warrants, with a purchaser affiliated with Trustar Capital and the founder Jinfeng Huang himself. As of the 20-F filing date (April 29, 2026), the first tranche had not yet closed. A founder-affiliated convertible is dilutive in form and a vote of confidence in substance — but the terms (coupon, conversion price, warrant strike, anti-dilution) were not disclosed in the governance section reviewed. The same risk-factor cross-reference flags that this financing exists because "cash from operations is not sufficient to meet our current or future operating needs."

Skin-in-the-game score: 7 / 10

A genuine 9/10 founder with 90.7% control would set the bar for "aligned." That score gets docked two points for the absence of performance conditions on the equity plan, for the rising related-party flow, and for the founder-affiliated convertible whose terms we cannot see.

4. Board Quality

The board can do the audit work; it cannot challenge the chairman. Three of three independents serve on all three committees — a clean structure, but a very small bench. There is no expertise gap on financial reporting (Zhang is a sitting tech CFO and ex-SEC audit partner; Ha is a Goldman MD and PhD economist; Zong adds VC/consumer-tech perspective). The gaps are in beauty/consumer industry experience (none of the independents has run a beauty brand) and in structural independence: the board cannot remove the chairman without a special resolution that the chairman alone controls.

The Plan Administrator for both share-incentive plans is the CEO himself — meaning option grants to executives and employees are decided by the same person who is the largest recipient when measured by votes attached to Class B. The compensation committee technically reviews CEO compensation, but the CEO is the sole administrator of the equity program from which all other compensation flows.

5. The Verdict

Governance Grade — Yatsen Holding: C+

Bottom line. This is a competent founder-led Chinese consumer business with a credible CFO/CSO bench and a higher-quality-than-average independent audit chair — held back, not by incompetence or scandal, but by a structural deck that lets one person make every consequential decision. The 2022 securities class action was dismissed in July 2024 (Skadden defended) and the operating execution since has been disciplined. But governance is rated on what could go wrong, not what has. The Trustar convertible and the rising RP flow are the two specific items to monitor over the next two reporting cycles.