Mylan has a board-election battle on its hands. Some powerful institutional investors are steamed about Mylan Chairman Robert Coury’s $97 million compensation in 2016—and they’re calling on fellow shareholders to vote him out.
Four pension funds, including the California State Teachers’ Retirement System and New York City Pension Funds, urged fellow shareholders Tuesday to vote against Coury and five other board members up for re-election. In a letter filed with the Securities and Exchange Commission, the investors also called for a vote against Mylan’s 2017 compensation plans.
Coury—the highest-paid executive in the drug business for 2016, according to FiercePharma research—racked up $97.6 million in compensation last year, including stock grants worth $50 million and a $20 million bonus, all at a time when his company was under fire for enormous price hikes on its EpiPen product and under investigation by Congress and federal agencies.
In awarding that $20 million bonus, Mylan’s board decided that Coury had exceeded its expectations with his “strategic vision,” Mylan’s “short- and long-term value creation for shareholders,” and its $7.2 billion buyout of Meda, which closed last year, among other things.
“Mylan’s Board reached new lows in corporate stewardship in 2016, when it agreed to make extraordinary and egregious payments in 2016 and over the next five years to Chairman and former CEO Coury,” the investors’ letter states, going on to say, “This very high level of compensation came amid a public and regulatory backlash for the price-hiking controversy involving Mylan’s EpiPen.”
In fact, the investors say, Coury’s compensation in 2016, when vesting of prior awards was factored in, totaled more than $160 million. And CEO Heather Bresch and President Rajiv Malik each racked up bonuses for 2016 as well as stock and option awards that were worth more than those they won in 2015.
The board members in the investors’ sights include Wendy Cameron, who heads up its compensation committee, and Mark Parrish, who leads the compliance committee. The others are Robert Cindrich, Neil Dimick and Randall Vanderveen.
While Coury’s enormous pay package—and Mylan’s history of raising eyebrows with its executive compensation—are top of mind for these investors, compensation isn’t their only beef with Coury and his board’s performance.
The letter goes back to Mylan’s 2015 fight to fend off a takeover by Teva, when it adopted a Dutch poison pill and mounted a hostile bid for rival drugmaker Perrigo. Mylan’s board oversight and compensation took fire in both of those battles.
As Mylan and Teva each scrambled for shareholder support, Coury & Co.’s compensation came in for questioning by the Israeli drugmaker, which has a history of paying executives more modestly. And in trying to avoid a Mylan takeover, Perrigo itself cited Mylan’s “legendary” shortfalls in corporate governance. Teva’s takeover bid failed—at $82 per share—and Mylan’s shares fell in 2016 to less than half that, or $38.15, the letter points out.
To the rebel investors’ minds, that fact showed that Coury wasn’t putting shareholder’s interests ahead of his own.
“All of the mudslinging back-and-forth between Mylan and Teva only served to reinforce our concern that Chairman Coury would rather keep his pay and power at Mylan’s helm than likely lose those benefits to Teva cost- and position-cutting,” the letter states. “Mylan’s entrenched Board and other governance failures—which remain today—had led to this debacle.”
This is far from the first time that Coury and his compensation have stirred controversy. Back in 2012, Coury caught fire for using the company’s aircraft to jet his musician son to concert venues. More than one-third of shareholders last year voted against the company’s compensation plans. And when the company engineered a tax inversion to move its domicile to the Netherlands, shareholders lambasted its plans to cover its top executives’ related excise taxes. The shareholders themselves expected to pay those taxes out of pocket.