AstraZeneca Faces Shareholder Uprising Over Changes to Executive Award
28 April 2017 - 5:16AM
Dow Jones News
By Denise Roland
AstraZeneca PLC has faced a large shareholder rebellion over its
pay arrangements for the company's chief executive and chief
financial officer.
The Cambridge, England-based pharmaceutical firm said 38.8% of
votes cast at its annual meeting Thursday opposed a change to its
distribution of a share award known as AZIP. The company said
investors holding 72.3% of shares voted on the remuneration
report.
Previously, AZIP would vest only if the company's core earnings
per share were at least one-and-a-half times the dividend and if
the company maintained or increased the dividend in each of the
four years following the awarding of the share. If the company
failed to do so in any given year, the share award would lapse.
AstraZeneca's remuneration committee proposed a loosening of
this requirement so that if the target is missed in one of the four
years, executives would still receive 75% of the award, rather than
none.
Graham Chipchase, chairman of the committee, said the proposal
stemmed from shareholder concern that the current structure
incentivized too great a focus on short-term earnings. He said
assessing dividend payments over longer periods would balance out
the effects of factors beyond management's control, such as
currency fluctuations.
Institutional Shareholder Services, a group that advises
investors, had opposed the remuneration proposal.
In a report, ISS said that the change "artificially protects the
executives against the lapse of these awards, which otherwise would
have occurred in the normal course, and as such is not considered
appropriate."
ISS noted that AstraZeneca -- which met those targets in 2014,
2015 and 2016 -- was likely to fail to meet the award's conditions
this year, when it expects core earnings per share to fall by a
low- to midteens percentage. Under the previous arrangement, AZIP
shares awarded in 2014, 2015 and 2016 -- relating to performance
through 2017, 2018 and 2019 respectively -- would lapse. But with
the change, bosses would still receive a portion of the award.
The ISS report added that AstraZeneca lagged behind competitors
in disclosing its annual bonus structure.
At the annual meeting, shareholders did strongly support another
proposal from the remuneration committee, which would scrap AZIP
awards from 2017 onward to simplify the company's long-term
incentive plans.
In a statement, AstraZeneca said it had "engaged extensively"
with its major shareholders, who mostly voted in favor of the
remuneration report.
In 2016, Chief Executive Pascal Soriot received total pay of
GBP13.4 million ($17.2 million). That comprised base pay of GBP1.2
million, plus benefits, bonuses and long-terms incentives. Marc
Dunoyer, the company's chief financial officer, received GBP4.5
million in total last year, on GBP707,000 ($908,495) in base
pay.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
April 27, 2017 15:01 ET (19:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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