In 2017, Pfizer’s board of directors was throwing money at CEO Ian Read to persuade him to stay at least through March of this year. His total compensation jumped more than 60% to $27.9 million, though a lot of that came from equity-based incentives.
Read is staying, but not in the role on which that high-value pay package was based—and the change shows in his 2018 compensation package.
Read’s total 2018 pay fell to $19.5 million, according to a proxy statement (PDF) filed with the SEC. Read shifted to the role of executive chairman on Jan. 1, handing the CEO job to former COO Albert Bourla. So Read’s long-term incentive award was cut by 38% to $8 million.
Still, the pay package wasn’t exactly a punishment. Read did get a 2% salary bump to nearly $2 million, and his bonus was hiked from $2.6 million to $3 million. The current value of his pension package is $14.6 million.
The strings that were attached to some elements of Read’s 2017 pay package are still in place. He got a special equity bonus worth $8 million that’s contingent on Pfizer’s stock returning an average of 25% or more for 30 consecutive days before the end of 2022, for example. And for the next two years, Read has to walk away from any job offers that may come from rivals.
All in all, Pfizer is pleased with Read’s tenure as CEO. The proxy lists nearly a dozen “key accomplishments” in 2018, including seven FDA approvals and the advancement of 42 pipeline drugs. Pfizer’s shareholder return was nearly 25% for the year, and it delivered 13% earnings-per-share growth. The company also set aside $600 million for venture investments, “25% of which will be earmarked for early stage neuroscience companies,” the proxy states.
Indeed, Read spent much of his nine-year tenure at the company slimming it down and refocusing its development efforts on high-value prescription medicines. He started his time in the CEO suite by selling off Pfizer’s Capsugel unit for $2.4 billion, after which he offloaded the company’s infant nutrition unit to Nestlé for $11.9 billion. Read is also credited with the highly successful spinoff of animal health company Zoetis.
After a 2014 failure to execute a megamerger with AstraZeneca, Read brushed off ongoing pressure from Wall Street to either pursue big deals or split Pfizer into smaller pieces. That said, recent moves to separate the consumer health business and Essential Health, which houses older brands, have left analysts hopeful that Bourla will pursue sales or spinoffs of those units.
In 2019, Read’s base salary will fall 40% to $1.2 million, the value of his short-term incentives will drop from $2.7 million to $1.8 million, and his long-term incentive package will fall from $13 million to $8 million as he moves into more of a counseling role.
Bourla, for his part, is counting on Pfizer’s pipeline to propel growth, including its anti-inflammatory candidate tanezumab and polyneuropathy treatment tafamidis. When it comes to dealmaking plans, he’s more committed to organic growth, commenting recently that a megadeal could "derail" Pfizer’s progress.
Perhaps, but Bourla will still have plenty of hurdles to clear. He’s already grappling with pricing pressure from Washington legislators, a federal probe related to EpiPen malfunctions and safety concerns surrounding its rheumatoid arthritis drug Xeljanz.
Bourla saw the total value of his pay package increase 11.5% to $9.9 million in 2018, but he’s due for a big bump this year as he takes on the CEO job. His base salary will rise from $1.4 million to $1.6 million, and he’ll be up for short-term incentives worth $2.6 million and long-term incentives of $12 million.