It looks as if Teva Pharmaceutical Industries ($TEVA) is taking its shareholders' concerns to heart. Just a few weeks after activist investor Benny Landa rallied support for a boardroom overhaul, Teva has promised to effect some changes: namely, cutting down the size of the board while upping the experience level.
|Teva Chairman Phillip Frost--Courtesy of Teva|
In a Wednesday letter, Chairman Phillip Frost told shareholders the company is reviewing the board's size and composition. "As part of this review, we intend to reduce the size of the Board while also adding new Board members with global healthcare experience," Frost wrote, noting that the company is now seeking candidates who fit the bill.
For some Teva investors, it's a case of better late than never. In a December email to leading shareholders, Landa claimed Teva's directors would consider his demands for reform this month, and so far, it appears that's the case. While Frost didn't provide any clues as to just how many board seats Teva would trim, Globes' sources speculate that the number of directors will drop to 12 from 15--exactly the slim-down Landa called for.
"This is a big step in the right direction and I welcome it," Landa told the Israeli newspaper Globes. "It looks like the board is on the right path and I'm certain they'll be working very soon, because the intention is very clear. I'm very encouraged by the direction and I'm waiting to see the results in the field."
But if Teva eliminates three positions and brings on some newcomers, that means more than a couple of current directors would be on their way out. Frost gave no hints as to who those might be, but he did rule out one board member: incoming CEO Erez Vigodman.
"Mr. Vigodman will continue as a member of Teva's Board, an important initial step in our evolving governance structure," he wrote. It's also an important initial step in making sure the company's new CEO doesn't follow in the footsteps of predecessor Jeremy Levin, who left Teva amid disagreements with the board.
Vigodman certainly won't be among the group with "global healthcare experience," as his Teva boardroom stint has been his only foray into the world of pharma. But analysts have highlighted his successful record in turning struggling companies around, and a new-look board could help him navigate the learning curve.
"This pharma-inexperienced CEO needs a board that can offer him pharma-seasoned advice," Landa wrote in December (as quoted by the Financial Times). "A board that is independent and free of conflicts of interest. In other words, a very different board from today's."
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