On Wednesday, Valeant ($VRX) put former CFO Howard Schiller into the CEO's position to replace hospitalized chief J. Michael Pearson on an interim basis. But if Pearson doesn't end up resuming his role at the company, he'll be walking away from millions in severance pay.
According to Pearson's contract, he's entitled to a $9 million golden parachute if he steps down for "good reason"--such as a demotion, Bloomberg notes. But vacating his position for medical reasons won't trigger the payout--and with a medical exit, he'd also forgo the chance to line his pockets with a much bigger handout later on.
On the flip side, if he does return and stays long enough for Valeant's stock to make gains--it's currently hurting on political pricing pressure and allegations that the company used its specialty pharmacy relationships to inflate its top line--he could end up banking hundreds of millions of dollars. With an eye on tying compensation to stock performance, the company granted Pearson restricted stock awards this January at $140.63. If shares climb to 50% above that price in 2019 and 2020, he could net up to 2.25 million shares, worth at least $527 million when they vest, the news service reports.
Right now, though, the timing of Pearson's recovery and return "remains uncertain," interim chairman Robert Ingram said in a statement earlier this week. Last month, the Canadian drugmaker announced he'd been sidelined with severe pneumonia, and the following week, he took a medical leave of absence. A three-man Office of the Chief Executive Officer--comprising General Counsel Robert Chai-Onn, Company Group Chairman Ari Kellen and CFO Robert Rosiello--took the reins at that point, calling the shots between Dec. 28 and Wednesday, when Valeant announced Schiller's CEO appointment.
Now, Schiller and the company's board will be working to "implement Valeant's strategy successfully in Mike's absence," Ingram said, and he's confident the drugmaker's CEO stand-in can get it done.
"Howard's performance as Valeant's CFO, as well as his deep understanding of Valeant's operations, are excellent," he said. "We are grateful that he has agreed to take on this role."
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