Valeant CEO's 2014 pay pales in comparison to new EVP's $50M-plus

Valeant Pharmaceuticals ($VRX) CEO J. Michael Pearson took down more than $10 million last year, including a whopping $8 million in incentive pay. But the real surprises in the company's 2015 proxy statement are farther down the chart.

Ari Kellen

The fast-growing drugmaker, built via a long series of buyouts, gave by far its biggest reward last year to EVP Ari Kellen. Kellen won a $50 million pay package, with more than $7.5 million in salary, bonus and incentive pay, plus $43 million worth of long-term share awards.

Kellen, company group chairman, got a $5 million cash bonus for his work integrating Bausch & Lomb, which Valeant bought in 2013. That integration was a job that included the kind of layoffs and cost cuts that Valeant is known for. According to the Valeant proxy statement, Kellen helped Bausch & Lomb top $850 million in annual cost savings 6 months ahead of schedule.

Some $6.5 million of Kellen's share awards came under Valeant's matching program, which gives executives one performance share for each share they purchase personally. The remaining $36.6 million in stock awards will vest beginning in October 2016, provided Kellen meets his performance targets.

Two other top Valeant execs nabbed major compensation packages, too. CFO Howard Schiller received share awards worth $23.7 million, which he can collect beginning late this decade, depending on performance. Robert Chai-Onn, general counsel and head of business development, got similar share awards worth $21.4 million. Those equity incentives brought Schiller's pay package to $27.1 million and Chai-Onn's to $23.9 million.

Pearson, Schiller, Chai-Onn and Kellen all collected incentive pay at 200% of their target, with the board's compensation committee boosting payouts for all four. The top payout came despite Valeant's failure to meet its dealmaking goal for the year. The company spent months trying to buy Allergan, only to lose out to a higher offer from Actavis ($ACT). The board gave its executives credit for backing off rather than raising Valeant's bid.

For 2015, Pearson negotiated a new employment contract, which includes at least one major change. His 2014 base salary was $1.91 million, about par with other pharma CEOs, give or take a few hundred thousand. But for 2015, his base salary will be nil. Pearson has elected to take all his compensation in the form of incentive pay.

- check out Valeant's proxy statement (PDF)

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