Carl Icahn accuses Forest Laboratories ($FRX) of harboring bad governance. But is Icahn calling the kettle black? Experts are raising questions about his incentive plan for one nominee to Forest Labs' board.
Icahn promised Eric Ende, a former biotech analyst and close associate, a cut of the profits if Forest's stock increases past $47.50 per share. As Reuters reports, Ende's 1% share of those profits would amount to $659,000, if Icahn were to sell his Forest stock at a $50-per-share price.
The news of Ende's incentive plan comes on the heels of Icahn's latest action against Forest's leadership. He's already nominated four men to serve on the drugmaker's board, saying that the company's current management isn't up to snuff. Now, he's suing for access to company records, citing a series of potential infractions by Forest management. Conflicts of interest, for one.
But as Reuters points out, Icahn's deal with Ende could be a conflict of its own. If Ende wins his seat on Forest's board, the side deal could weight his decisions toward Icahn's interests and against other shareholders. "This raises novel and unique and difficult fiduciary duty questions if Ende were to be elected," Columbia Law School's Robert Jackson told the news service.
Of course, a higher stock price for Forest would benefit all its shareholders. But as Jackson points out, "[w]hat's especially difficult about this agreement is that his payment depends not on the returns to the stock as a whole but on Icahn's profit."
- read the Reuters story
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