Teva Agrees to Specify Executive Pay as Lawsuit SettledDavid Wainer
Teva Pharmaceutical Industries Ltd. agreed to publish individual executives’ pay, settling an investor class-action lawsuit filed in Tel Aviv that argued the company violated Israeli and U.S. rules for more than a decade.
The world’s largest generic drugmaker will begin releasing compensation details for each of its top managers starting with its 2013 annual financial report, Petach Tikva-based Teva said in an e-mailed statement.
Teva’s decision may lead to increased transparency among other companies with stock traded both in Israel and abroad that followed the drugmaker’s example when it stopped publishing individual pay, according to shareholders Sharon Hannes and Ehud Kamar, the law professors who filed the suit.
“Teva will change its compensation disclosure practices in a significant way,” Hannes and Kamar said in a separate statement. “We expect other dual-listed companies to follow Teva and also disclose executive compensation on an individual basis.”
The settlement marks another shift in approach under Chief Executive Officer Jeremy Levin, who pledged last year after succeeding Shlomo Yanai in the post that Teva would be more open with information. Teva also agreed to pay about $200,000 to compensate the plaintiffs, whose filing was based on a complaint that the company misinterpreted a law change in 2000.
The drugmaker switched from reporting pay for each of its five top managers in its 1999 and 2000 annual reports to publishing a combined figure after Israeli law was changed to allow dual-listed companies to use the financial statements produced under rules of the other country where the stock trades. Teva’s reading of the law prompted other Israeli companies also listed abroad to stop reporting individual compensation figures, according to the plaintiffs.
“This should begin a new chapter in the history of Israel’s capital markets, one in which shareholders of all public companies can monitor executive pay and ensure that its level and structure are appropriate,” Hannes and Kamar said.
The investors sued Teva in November, almost four months before Swiss voters approved some of the world’s toughest limits on corporate executive pay. In Teva’s 2012 annual report, released on Feb. 12, it said that cash compensation that year for its 11 top executives totaled $12.7 million, and they received another $4.04 million exercising stock options.
Hannes is a law professor at Tel Aviv university, while Kamar is professor of law and director of the business-law program at the University of Southern California. Shares in Teva are traded in both Israel and the U.S.
The case was Class Action 18048-11-12.