After Mylan reported first-quarter results, investors punished the company for its ongoing struggles by sending shares down 24%. But as one analyst observed at the time, the decline was about more than just profits and losses.
And now, the company is facing new backlash—and new questions about its executive pay rules. Pension fund adviser CtW has smacked Mylan's board for stalling a compensation clawback proposal, and it's urging shareholders to vote against the nominating and governance committee members up for election at its June 21 annual meeting.
Right now, Mylan limits compensation clawbacks to misconduct that leads to financial restatements, but the fund adviser says it wants to step up those rules—and Mylan has thwarted at least one effort to take the idea to shareholders. The company blocked a vote on a proposal made by the UAW Retiree Medical Benefits Trust that called for stronger executive clawbacks, CtW says.
Mylan told the SEC it wouldn’t put that proposal on its proxy ballot, saying the trust didn’t own enough shares to bring the matter to a vote. The company did include the item in a non-voting section of its proxy statement, but CtW says the “classification reflects what we view as a disrespect for the rights of Mylan shareholders.”
“There is enormous value in the board being able to receive the collective view of shareholders on issues of importance to them and to the company,” the group wrote in a letter to investors. “Shareholder proposals, even if non-binding, play a valuable role in allowing the board to understand the views of shareholders, to whom the board is, in theory, accountable.”
Mylan representatives didn’t immediately respond to a request for comment.
It’s not the only time investors have lashed out at Mylan in recent months. After the company posted first-quarter results, shareholders sent shares down 24%. At the time, RBC Capital Markets analyst Randall Stanicky wrote that the decline “sent a clear signal that was beyond” profits and losses. Mylan's shares have fallen about 38% since May 6.
“Management challenges forecasting the business, delays in responding to industry change and governance frustrations contributed to an overly punitive sell-off sending shares back to mid-2012 levels,” he wrote.
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In his own note to clients, Wells Fargo analyst David Maris highlighted some of his concerns, including the disclosure that Mylan’s chairman Robert Coury collects payment for not using the company’s plane. In a securities filing (PDF), Mylan said Coury is owed 70 hours of personal aircraft use per year, or up to $1.5 million in cash for unused time. He used the aircraft for 26.5 hours last year and pocketed a payment of $947,524 for the remainder.
Despite past and current governance issues at Mylan, the company recently entered new employment contracts with top executives, Maris wrote. Among its issues are price collusion allegations, long delays to launch generic Advair and cuts to financial projections.
Overall, the airplane deal and new management contracts “seem to not recognize the stock price performance and current political environment,” Maris wrote.