January 9, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Things are getting contentious over in the boardroom of huge biopharma Mylan Inc. ‘s boardroom, after the firm’s former chief executive told the U.S. Chamber of Commerce that proxy advisory firms hired to help the company iron out difference between directors and executives have been causing more trouble than they have solved.
“We should all be playing by the same rules,” Robert Coury, Mylan’s executive chairman, told the U.S. Chamber of Commerce at a proxy advisory firm conference, reported The Deal. “The proxy advisory firms are not.”
Coury was referring to Mylan’s current proxy advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., which have been brought in to make recommendations for specific corporate votes. But so far, Coury said the firms have been too heavily biased in favor of activist fund managers who are attempting to get their management choices placed on its board of directors.
That’s lead to a lot of tension between the company’s current management and other investors who are perhaps more interested in advancing their own ideas about how the company should be run—particularly when it comes to vetting potential acquisitions or share buybacks and special dividends.
“When we [Mylan] pick up the phone and try to make contact with our investors, some are very obliged to take our meeting while others say they don’t need to talk to us because they are already going with the proxy advisory firm recommendations,” said a frustrated Coury told The Deal.
“We’re asking our shareholders, ‘Let us come in front of you and tell you our side of the story. You don’t have all the data about what is going on in the boardroom,’” Coury said. “If those institutions are not giving access to the company their stock should not count. These proxy advisers have a dangerous amount of weight when it comes to these recommendations.”
As such, Coury has been pressing the Securities and Exchange Commission to prohibit investors from voting their shares if haven’t spoken to that targeted company, especially if it has received a negative review from a proxy advisory firm. He also called for more transparency in their process of deciding who gets a shareholder nod and who doesn’t.
“Why shouldn’t you guys disclose your internal processes; what you go through?” he said. “How do you derive what you are deriving? If you haven’t taken the time to talk with the company how do you form your basis for the position you take.”
But the targets of Coury’s ire appeared to be sanguine on the issue Friday, with Robert McCormick, chief policy officer at Glass Lewis, saying the firm already does everything it considers necessary.
“Other than disclosing our proprietary methodology I’m not sure what else we could disclose,” McCormick said. “You don’t disclose specific aspects of Mylan‘s pharmaceutical business but you do disclose certain aspects of it. There is a balance to be struck there.”
McCormick said there was already a rebuttal process in place and pointed to multiple regulations that although an impacted company to query that rating.
“We’ve considered that but the company can file a rebuttal in proxy documents and on occasion they do rebut our or ISS recommendations and we’ll update our report to reflect that,” he said.
“The institutional investors I know who hold the bulk of the shares in the U.S. talk to companies and that includes index funds.”
