8. Kenneth Frazier, Merck & Co.

Merck CEO
After ditching the company's mandatory retirement policy, Merck's board handed CEO Ken Frazier a massive raise. (PhRMA)

8. Kenneth Frazier, Merck & Co.
2018 pay: $20.93 million
2017 pay: $17.64 million
Change: 19%

For Merck’s board members, keeping CEO Kenneth Frazier happy didn’t just involve giving him a 19% raise in 2018. They also had to rewrite the company’s long-standing retirement policy to keep him on the job.

And that they did, scrapping the retirement policy altogether in late 2018 so Frazier would be able to stay on as CEO after he turns 65 later this year. What’s more, the board did some fancy footwork when calculating his raise, allowing the CEO to still collect the $2.5 million he would have received from a pension benefit had he retired on time.

Frazier’s total pay package (PDF) of $20.9 million included not only a 2% salary boost to $1.61 million but also increases to his stock and option awards, as well as his cash incentive plan benefits.

Frazier was rewarded handsomely for Merck’s performance, which last year was driven largely by immuno-oncology blockbuster Keytruda. Its sales nearly doubled to $7.17 billion as Merck added FDA approvals for the drug in cervical cancer, Merkel cell carcinoma and primary mediastinal large B-cell lymphoma. Keytruda’s performance helped push the company’s total sales up 5% in 2018 to $42.3 billion—growth that was also fueled by strong demand for its vaccine and animal health products.

The board recognized Frazier for helming the company through that growth period by increasing his long-term incentive award by $500,000, which brought the total worth of his grant package to $13 million. The company boosted Frazier’s total direct compensation package by 3.6%.

Frazier has been working hard to diversify Merck’s pipeline beyond Keytruda, and toward that end, the company inked 60 deals in 2018. It formed a $5.76 billion pact with Eisai to develop cancer drug Lenvima, for example, and it paid $394 million to buy Viralytics, a developer of cancer-killing engineered viruses.

Frazier will be taking on plenty of challenges in the coming years, not the least of which is ongoing pressure from Wall Street to pursue more deals that could strengthen Merck’s pipeline. And the company is a favorite target of Washington legislators who are up in arms about drug pricing.

For any other CEO, it might be tempting to take the multimillion-dollar pension benefit at age 65 and run. But Frazier is sticking around, and for his loyalty, the board is adding the $2.5 million he walked away from to his deferred compensation program. All he has to do is stay until at least January 2020 to collect it.

8. Kenneth Frazier, Merck & Co.

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