Vertex CEO’s $45.8 Million Pay Last Year Excessive, ISS Says

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Vertex Pharmaceuticals Inc. paid Chief Executive Officer Jeff Leiden too much for 2014, and shareholders should vote against his compensation, said corporate governance adviser Institutional Shareholder Services Inc.

“The total level of CEO pay is excessive and is not contingent upon rigorous performance conditions,” ISS said in a note to clients. Shareholders should cast a non-binding vote of disapproval at the company’s annual meeting on June 4, ISS said.

Leiden, 59, got pay in 2014 that’s now valued at $45.8 million, 40th among U.S. executives at publicly traded companies, according to the Bloomberg Pay Index. Bloomberg’s data uses the current market value of the compensation, including stock options.

Since he took over as CEO of the maker of cystic fibrosis drugs in February 2012, the company’s shares have gained 226 percent, while the Nasdaq Biotechnology Index rose 207 percent.

ISS provides advice to asset managers on shareholder votes and class-action securities lawsuits.

Leiden was given $14.9 million in a one-time restricted stock grant for retention during the “critical business transition period from 2015 to 2017,” according to a filing by the Boston-based company. The shares don’t vest for at least three years and are forfeited if the Vertex doesn’t reach an operating profit over the prior 12-month period.

Not Profitable

Vertex hasn’t been profitable since 2012, based on earnings before interest, tax, depreciation and amortization, and isn’t projected to make money on that basis until 2016, according to analysts’ estimates compiled by Bloomberg.

Leiden was also paid $1.1 million in salary, $3 million in a cash bonus and $19.9 million in stock awards last year, according to the filing.

“We’re in a constant war for talent,” Vertex spokesman Zach Barber said in a telephone interview. The stock award was designed to retain the company’s leaders over the next several years as it awaits a second regulatory approval for a cystic fibrosis drug and develops new treatments for the disease and other illnesses, Barber said.

ISS said the CEO’s pay level was based on “non-rigorous” methods and that the drugmaker compared itself to larger pharmaceutical companies, skewing the perspective.

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