AstraZeneca has a problem. Not with its pipeline, but with the way a significant chunk of shareholders views its executive pay program.
AstraZeneca has a problem. Not with its pipeline, but with the way a significant chunk of shareholders views its executive pay program.
Over the weekend more than 35 percent of shareholders in the U.K.-based pharma giant rejected or abstained from supporting an executive pay plan. This is the second time shareholders have opposed the compensation package for Chief Executive Officer Pascal Soriot. This year the block of investors objected to the £9.4 million ($12.64 million) compensation package for the CEO. This year’s package was significantly less than last year’s package of £13 million ($17.5 million), which was also given a thumb down by about the same number of shareholders, The Guardian reported.
The investor revolt came one day after the company released disappointing results for the first quarter of 2018. The company reported that revenues were down about 4 percent to $5.18 billion. However, AstraZeneca said it remains on track for a “promised return to sales growth in 2018,” CNBC reported.
Shareholder groups, including International Shareholders Services and Pirc, advised against the pay package proposal. The groups argued that targets set for Soriot by the remuneration committee were not challenging enough. ISS said the 1.9 million bonus for Soriot was “not suitably aligned with performance,” The Guardian added.
One investor, John Fisher, told the board of directors during the meeting that despite Soriot’s pay cut from £13 million to £9.4 million, “the remuneration is still far too high”. Fisher went on to say, according to The Guardian, that Soriot is being “overpaid for underperformance.”
A member of the remuneration board replied that Soriot and his leadership team have helped initiate a turnaround at the company that began in 2012. The board member, who was not named by The Guardian, credited Soriot with preventing a disaster at the company.
“If Pascal and his team had not come along when they did, we would have been in a far worse position than we are in today,” the board member said, according to The Guardian.
The board member’s comments were enough for a 65 percent majority of the shareholders who approved the remuneration package.
Following the vote, AstraZeneca told The Telegraph it was disappointed that it has been unable to please a significant voting bloc, despite the enhancements it’s made in executive compensation package. The company said it will continue to “engage with shareholders” to determine how best to address their concerns, The Telegraph reported.
Having shareholders grouse about remuneration at AstraZeneca is nothing new. Shareholders opposed the plan last year, as well as to years ago. In 2016 the company explored ways to link Soriot’s pay to the company’s $45 billion target revenue by 2023. That same idea was floated in 2015 following the company’s rejection of a takeover bid by Pfizer.
