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Proxy firm urges Mylan investors to vote out CEO, chairman

June 13, 2017
Life sciences

Proxy advisers at ISS are up in arms about the huge pay packages Mylan hands to board members and execs, despite the fallout from its controversial EpiPen pricing. They’re so upset, in fact, they’re urging shareholders to oust 10 of Mylan’s board members—including Chairman Robert Coury and CEO Heather Bresch, who were paid $97 million and $13.8 million respectively last year.

In a 35-page manifesto, ISS argues that Mylan and its shareholders have suffered “significant destruction in shareholder value as a result of the EpiPen pricing and classification controversies,” all the while following an executive compensation policy that “has been marked by egregious pay decisions and large payouts.”

The proxy firm suggests shareholders vote against all but one of Mylan’s board members, Sjoerd Vollebregt, an independent Dutch businessman who was elected in May. Shareholders are set to vote later this month.

A Mylan spokeswoman said in an e-mailed statement that the board “has overseen a period of strong and sustainable long-term growth, and that the recommendation and rationale to remove the Board and leave the company without any leadership is simply irrational and not in the best interests of the company, its shareholders and other stakeholders.”

The ISS report cites the laundry list of EpiPen legal woes, including subpoenas from the SEC, the Federal Trade Commission and several state attorneys general, and the $465 million settlement Mylan paid to settle claims that it overcharged federal health insurers for the product. It also outlines other ongoing investigations, among them a subpoena from the U.S. Department of Justice on Mylan’s marketing of generic doxycycline.

Over the last year, Mylan stock has lost 29% of its value while the S&P 500 has risen 12%, the ISS report points out. And Bresch’s pay has “outranked” total shareholder returns for the last three years relative to executive pay at similar pharma companies, ISS wrote. Therefore the company has “a high concern with respect to the alignment of CEO pay and company performance,” it concluded.

On Monday, Mylan responded at length to the ISS recommendation with its own letter to shareholders. The company pointed to its stock appreciation over the last 15 years, which resulted in its market capitalization growing from $3 billion to $20 billion. Much of that growth has come from a series of M&A deals.

The company asserted in the letter that it boasts an “engaged, refreshed, and responsive” board that includes a “diverse” mix of directors and that it ties executive pay to “challenging targets” that have “led to strong long-term growth.”

Mylan’s justification of its high pay—particularly Coury’s $97 million package—is falling on deaf ears, though. Two weeks ago, four pension funds that hold Mylan shares urged other shareholders to vote against six board members, including Coury. They also recommended a “no” vote on Mylan’s compensation plans for 2017.

So will any of this matter when shareholders convene at Mylan’s annual meeting on June 22? Don’t bet on it. Mylan adopted a policy stipulating that unseating a director requires a two-thirds vote, ISS explained in its report. “This provision makes it unlikely that any director nominees will fail to be elected to the board at this meeting,” it said.

By Arlene Weintraub

Source: Fierce Pharma

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