Teva promised investors it was pulling in top talent when it hired new CEO Kåre Schultz last fall. And to do that, it put down top dollar.
The Israeli drugmaker, which is struggling under a mountain of debt in the wake of its disastrous Allergan generics pickup, doled out $17.03 million to its new chief in 2017, according to its annual filing (PDF download) with the Securities and Exchange Commission.
That’s more than double the amount Teva paid former CEO Erez Vigodman in 2016, his last full year on the job. Vigodman picked up $6.5 million that year. It’s also only about $8 million less than Teva paid its top five officers combined last year.
Chairman Sol Barer, though, told investors repeatedly during Teva's months-long CEO search that the company wasn't messing around and would do whatever it took to nail down a "world-class" pick. It also relaxed a requirement that its CEO live in Israel, which has limited its options in the past.
The bulk of Schultz’s compensation came in stock awards which totaled $14.23 million. Option awards tallied $2 million, while his base salary checked in at $333,333. That base salary figure is more than $1 million less than Vigodman netted in each of the last three years, but it’s no surprise, considering Schultz’s task hinges on elevating Teva’s battered shares.
Teva also awarded Schultz $464,591 in other compensation, $125,000 of which went to reimbursing him for legal fees he incurred while negotiating his employment contract with Teva. A tax gross-up accounted for $201,339, while housing and relocation expenses reached $41,393.
Unfortunately for Teva, the company also forked over millions in 2017 to exiting employees. Besides Vigodman, who exited one month and change into 2017, former CFO Eyal Desheh; and former specialty meds CEO Rob Koremans each pocketed more than $1 million in termination payments. Overall, Vigodman made $2.83 million despite stepping down in February, while Desheh, who stepped down in July, grabbed $4.2 million.
Meanwhile, Novo Nordisk and Lundbeck veteran Schultz wasted no time cutting other costs at the Petah Tikva-based pharma. After taking the helm Nov. 1, he rolled out a $3 billion cost-squeezing plan in mid-December that’s set to claim 14,000 jobs when all is said and done.
Industry watchers have so far responded positively to the move. Earlier this year, Credit Suisse analyst Vamil Divan, for one, upgraded Teva’s shares, pointing to “early signs of execution” on the restructuring.