EpiPen Blowback Builds as Adviser Backs Dumping Mylan BoardBy and
ISS calls for vote against all incumbent Mylan board members
Mylan board structure makes it difficult to remove directors
Mylan NV faces an increasing backlash over its handling of the EpiPen pricing controversy, as a top proxy adviser urged shareholders to oust the drugmaker’s board.
Shares of Mylan declined 2.6 percent to $39.06 at 12:48 p.m. in New York after Institutional Shareholder Services Inc. said that the company’s directors had failed to stop “significant destruction in shareholder value.” ISS took issue with the company’s governance on a broad scale and faulted the board for making “egregious” decisions on pay.
“All incumbent directors should be considered accountable for material failures of risk oversight over a number of years, when warning signs were available to the company but no actions appear to have been taken,” ISS said in an emailed report. ISS did recommend voting for one director nominated in May, Sjoerd Vollebregt.
Mylan’s corporate-governance rules make it difficult to force out directors, and shareholders rarely vote to completely turn over a company’s board. ISS also advised voting against the company’s compensation proposals, which include a $97.6 million pay package for Chairman Robert Coury for 2016.
A Mylan spokeswoman said investors are aware that the board has “overseen a period of strong and sustainable long-term growth.”
“The recommendation and rationale to remove the board and leave the company without any leadership is simply irrational and not in shareholders’ best interests,” spokeswoman Nina Devlin said.
The ISS report follows an outcry over price increases the company carried out for EpiPen, a self-administered injection for dangerous allergic reactions that has been the company’s biggest product.
Since acquiring the drug in 2007, Mylan has raised the price several times, to more than $600 for a two-pack from about $57 a shot. The company has since launched a generic version in response to the controversy, but a decline in EpiPen sales due to increased competition has started to show up in Mylan’s earnings.
ISS’s recommendation follows a similar report on Friday by Glass Lewis & Co., another advisory firm. Like ISS, Glass Lewis called for a vote against Coury’s pay package. It also called for a vote against three of six directors that a group of pension funds has called to unseat.
“Executive compensation for 2016 included multiple egregious pay decisions and large payouts despite the harm to the company inflicted by the EpiPen controversies,” ISS said in the report. The firm also said Mylan had “suffered long-term reputational damage” because of the company’s actions.
A group of institutional investors including New York City Comptroller Scott Stringer and the California State Teachers Retirement System, or CalSTRS, have called for unseating six of Mylan’s board members.
“The case for holding Mylan’s entrenched chairman and board accountable could not be stronger,” said Stringer said in an emailed statement. “This was ultimately another misstep by a board with a costly history of oversight failures.”
The pension funds hold only a sliver of Mylan’s shares, far short of the two-thirds majority ISS said is required to reject a board member. Proxy firms like ISS and Glass Lewis give advice to large institutional investors and can influence the outcome of a vote by as much as 20 percent, research suggests.
Mylan’s annual shareholder meeting is scheduled for June 22 in Amsterdam.