Photographer: Simon Dawson/Bloomberg

AstraZeneca Shareholders Revolt Against Drug Giant's Pay Report

  • Vote on remuneration report isn’t binding for drugmaker
  • Drug group pleased that pay policy comfortably wins approval

AstraZeneca Plc suffered one of the largest shareholder rebellions so far this year in the U.K., with 39 percent voting against the drug giant’s pay report.

The vote on the report, which covers pay for last year and existing long-term packages, isn’t binding and doesn’t require the U.K.’s second-largest drugmaker to claw back the money. The proposed compensation policy for future years, which does face a binding vote, didn’t encounter opposition, with 96 percent of shareholders voting in favor.

Still, the shareholder discontent on the pay report underscores broader dissatisfaction in the U.K. about the gap between the pay of top executives and that of ordinary workers, which Prime Minister Theresa May has called “unhealthy.” 

“Politically, everybody’s feeling under the spotlight,” said Stefan Stern, director of the nonpartisan High Pay Centre.

Chief Executive Officer Pascal Soriot’s compensation, including salary, bonus, long-term incentives and other benefits, rose 68 percent last year to 13.4 million pounds ($17.3 million). The drugmaker has already made changes to its long-term incentives program based on shareholder feedback, and consulted investors widely on the new pay policy, spokeswoman Vanessa Rhodes said. Soriot declined to comment on the matter during a conference call with journalists Thursday.

Bosses’ Pay

A FTSE 100 boss earned 128 times more than an average employee in 2015, up from 47 times in 1998, while average CEO pay jumped to 4.3 million pounds a year from about 1 million pounds, government data show.

The government has looked at forcing public companies to publish pay ratios detailing the difference between a CEO’s pay and an average worker at their firm. Some companies, such as Legal & General Group Plc have volunteered the information, but AstraZeneca is one of a number that declined to do so.

“My focus is really on driving the transformation of this company and rebuilding the pipeline,” Soriot said, referring questions on his compensation to the remuneration committee. “Over the next couple of years, we believe a transformation will become more and more evident.”

Starting this year, the so-called AstraZeneca Investment Plan (AZIP) for long-term stock awards to executives is being discontinued, the drugmaker said in March. For shares that have already been granted under this incentive program, AstraZeneca proposes to adopt a sliding scale to assess performance until they are phased out, the spokeswoman said on Thursday.

“The lower level of support for the Remuneration Report is considered to reflect concerns regarding how the AstraZeneca Investment Plan (AZIP) will be operated for the outstanding AZIP awards previously made, and the level of information given about the annual bonus plan and awards,” the company said in a statement announcing the results.

Opposition

Institutional Shareholder Services Inc., or ISS, an influential investor advisory group, recommended that shareholders vote against the AstraZeneca pay report and shareholder Royal London Asset Management declared publicly it would oppose the report and the re-election of the chair of the remuneration committee.

The biggest shareholder revolt in the U.K. so far this year has been at homebuilder Crest Nicholson Holdings Plc, where 58 percent of those who voted opposed the company’s pay report. Other companies, such as Imperial Brands, Chemring Group Plc and Safestore Holdings Plc have withdrawn pay policies to avoid defeats on binding votes.

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