Teva Activist Claims Symbolic Win as Directors PressuredDavid Wainer
An activist investor calling for change at Teva Pharmaceutical Industries Ltd. said the result of a shareholder vote to reappoint all board members is a victory, and that the level of dissent shows the company will have to listen to stockholders.
Teva’s shareholders passed all measures that were up for approval at the company’s annual meeting today at its Petach Tikva, Israel headquarters. That included the reappointment of board members Ori Slonim and Joseph Nitzani, Teva said in an e-mailed statement. Slonim’s reappointment had been opposed by Benny Landa, an activist investor.
Shareholders voted in favor of Slonim’s reappointment by a 63 percent majority while Nitzani was reappointed by a 69 percent majority, Teva said. A measure to purchase liability insurance for directors and officers received 74 percent of the votes, in a symbolic rebuke from investors dissatisfied with the board’s overhaul.
“Today was a major victory for shareholders because though we did not win the vote, the message to the board was loud and clear,” Landa, who has sought to unite shareholders in pressuring the board to reform, said in a telephone interview. “The company had to announce results of elections in explicit details for the first time and that is a huge step forward. And the company is expressing strong commitment to make change.”
The outcome of the vote in a charged meeting that lasted for four hours underscores the dissatisfaction even as Teva made efforts to address shareholder demands with board changes last month. While Teva had vowed to overhaul its board earlier this year, the appointment of only one new director, Jean Michel Halfon, and Chairman Phillip Frost’s announced early retirement, fell short of some investors’ expectations.
“The message we received from shareholders is clear,” Teva’s board said in the statement. “We are committed and continuing our efforts to address matters important to our shareholders and to improve corporate governance.”
Landa, who was present at today’s meeting, had wanted Teva to replace most of its directors this year with pharmaceutical veterans who could support Vigodman, the company’s new CEO, as he seeks to streamline operations to overcome a slowdown in sales growth.
Teva’s Frost, who was not present at the meeting, has said the mix of expertise will change over time as some directors resign and new ones are recruited. When Halfon, a former head of emerging markets at Pfizer Inc., was nominated in June, the Israeli drugmaker announced that Teva veterans Chaim Hurvitz and Dan Suesskind would be leaving the board this year, alongside Dafna Schwartz.
“Landa has a point,” said Gilad Alper, a senior analyst at the brokerage unit of Excellence Nessuah, which manages the equivalent of $20 billion. “A company like Teva needs as many pharma and business experts as they can get.”
Landa praised Teva for revealing the results of today’s shareholder votes. Because of a loophole under Israeli law for dually listed companies, Teva has historically not disclosed the vote count, Landa said.
To protest Teva’s unwillingness to name more seasoned pharma directors and change its statutes to make it easier to oust board members, Landa and Ruth Cheshin, a former director and member of Teva’s founding family, lobbied shareholders to strike down Teva proposals.
Landa and Cheshin filed a “position paper” to all shareholders calling on them to vote against the appointment of Slonim, who they say is an “entrenched” board member lacking pharmaceutical experience. They also advised investors to vote against the insurance purchases.
Their position received the backing of governance analysis and proxy voting firm Glass Lewis & Co. as well as Israeli consulting firm Entropy Consultants Ltd. Glass Lewis had called on investors to vote against other Teva proposals, including the election of board members Joseph Nitzani. Another firm, ISS Proxy Advisory Services, recommended shareholders vote in support of all Teva proposals.
Teva pledged to overhaul its board after former CEO Jeremy Levin departed last year amid a dispute with the company’s directors. Levin’s abrupt ouster in October fueled concern that the board was rife with internal feuds and lacking in professional expertise.
After Levin’s departure, Landa urged institutional investors to call for a special meeting to propose governance changes. He sought a reduction in the size of the 16-member board, the addition of pharmaceutical industry veterans as directors and changes to the company’s statutes.
Teva earlier this month denied it had chosen a new chairman after Landa identified Vice Chairman Amir Elstein as the board’s pick to oversee the generic-drug maker. Moshe Many, Teva’s former vice chairman, informed Landa that Elstein was chosen to replace Frost, Landa wrote on his blog on July 13.
“Even though the board claims to have hired a reputable search firm to identify credible succession candidates, I was informed yesterday by Moshe Many, Amir Elstein’s predecessor as vice chairman, that the board has already decided that it will name Amir Elstein as the next chairman,” Landa wrote.
“We insist on proper corporate governance –- and expect the board composition to be upgraded,” he wrote on the blog. “Teva should name a chairman of international repute, befitting the position.”