- Salary surged 25 percent in weeks before Baxalta bid disclosed
- Board discussed pay raise with shareholders six months later
Shire Plc boosted Flemming Ornskov’s compensation fivefold last year to allay concern the chief executive might be wooed away by a rival following his “exceptional performance.”
Ornskov’s total compensation rose to $21.6 million, Dublin-based Shire said in its annual report Tuesday. That includes $16.8 million in long-term incentive awards. The CEO’s base pay surged 25 percent to $1.69 million.
The salary raise took effect on July 1, weeks before Shire disclosed its pursuit of Baxalta Inc. Shire’s board didn’t discuss the increase with its largest shareholders until January, as the drugmaker put the finishing touches on its winning $32 billion bid for Baxalta, Anne Minto, the director who oversees the remuneration committee, wrote in the report.
“There was an immediate requirement to take action to ensure the CEO’s retention given his attractiveness as a potential recruitment target,” Minto said. “It was appropriate to make the salary increase in July 2015 despite the uncertainty surrounding the outcome of a possible transaction with Baxalta.”
Shares of Shire rose 1.1 percent to 3,921 pence as of 4:02 p.m. in London trading. Total returns to investors on the stock has slumped 28 percent in the past year.
Because the increase is “atypical when considered in the context of normal market practice,” Ornskov’s salary will be frozen for three years, Shire said. Before the increase, his pay had lagged behind peers such as Baxalta’s Ludwig Hantson, who received $18.6 million for 2015.
Ornskov’s compensation is now almost double that of Pascal Soriot, who runs British drugmaker AstraZeneca Plc, a company twice Shire’s market value. Some biotech companies of similar size pay much more, such as Vertex Pharmaceuticals Inc., whose CEO earned $36.6 million, and Regeneron Pharmaceuticals Inc., whose CEO compensation was almost $42 million, according to data compiled by Bloomberg.
Under Ornskov’s leadership, Shire has roughly doubled in market value to about $33.5 billion. The company had $6.4 billion in sales last year and will rank as the world’s biggest maker of drugs for rare diseases after the Baxalta takeover. The combined companies will generate $20 billion in revenue by 2020, Shire has said.