Drugmakers Face Opposition on Chiefs' Pay by U.K. Advisory Firm

  • Shire's Ornskov paid 1,285 percent of salary in variable pay
  • Soriot's pay is 64 times that of average employee; Witty's 56

A key shareholder advisory firm recommended investors vote against the compensation awarded to chief executive officers at Shire Plc, AstraZeneca Plc and GlaxoSmithKline Plc, calling their incentive payments “excessive.”

Astra CEO Pascal Soriot’s bonus and long-term incentives amounted to 580 percent of his salary, and his bonus targets weren’t disclosed, according to a report issued Thursday by Pensions & Investment Research Consultants Ltd. Glaxo CEO Andrew Witty’s variable pay was “highly excessive,” at 460 percent of salary, while Shire CEO Flemming Ornskov’s incentives came in at 1,285 percent, it said in separate notes.

Soriot’s pay was 64 times that of the average employee at London-based Astra, while Witty’s was 56 times, the advisory firm said. The pay raises at the three drugmakers aren’t in line with total shareholder returns or their financial performance over the past five years, PIRC said. The criticism comes as investors prepare to make recommendations at annual meetings for the U.K. companies, most of which allow shareholders to hold binding votes on pay plans only every three years.

Increased Scrutiny

Other U.K. chieftains have also come under fire in recent weeks over their pay. BP Plc shareholders voted in protest against a decision to award Chief Executive Bob Dudley a 20 percent pay increase after the company reported a record net loss and announced thousands of job cuts. Investors also opposed pay plans at medical-device maker Smith & Nephew Plc this month, and may push back against Shire’s compensation plans next week.

Astra shares rose 0.4 percent to 4,158 pence in London trading on Thursday. The stock has dropped about 10 percent so far this year. Glaxo ended the day 0.5 percent higher, while Shire climbed 2.8 percent.

Royal London Asset Management, which holds shares in both Shire and AstraZeneca, is voting against the pay packages at both companies, said corporate governance manager Ashley Hamilton Claxton.

Escalating Concerns

Her firm has voted against pay packages at Shire going back to at least 2013, Claxton said. This year, Royal London is abstaining on the vote for re-electing Anne Minto, who chairs the board’s remuneration committee, to “escalate our concerns” around CEO pay at Shire, she said.

In its report, PIRC said Astra had responded by saying the five-year shareholder return data was skewed by having had three CEOs in the period, and that Soriot’s salary stands in the lower quartile of global pharmaceutical peers.

“The balance of CEO realized pay with financial performance is not considered acceptable,” PIRC said in its recommendation on Astra. Recent targets for Soriot’s annual bonus weren’t disclosed because the company deemed them commercially sensitive, the advisory firm said.

The U.K.’s second-biggest drugmaker said in March it was looking at ways to more clearly link executive compensation to its 2023 revenue target of $45 billion. Soriot set out the revenue goal in 2014 as he rejected a takeover offer from Pfizer Inc.

“While some shareholders have stated they would like to see a direct link between executive pay and the 2023 revenue target, that is not necessarily the view of the majority,” Astra spokesman Neil Burrows said via e-mail. The drugmaker has set “challenging performance measures for both the annual bonus and the long-term incentive plan,” he said.

Spokesmen at Glaxo and Shire didn’t immediately respond to queries for comment.

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