Shire Investors Pissed over Flemming's 25% salary increase

Dr Ornskov has had a nice pay increase

Angry investors hit back at Shire over executive pay

Dr Ornskov has had a nice pay increase

• Julia Bradshaw

28 APRIL 2016 • 4:07PM

Pharmaceuticals giant Shire suffered a major revolt over executive pay at its annual general meeting after 49.45pc of shareholders in Dublin voted against a remuneration report that gave chief executive Flemming Ornskov a 25pc pay rise.

The Danish national's base pay surged by a quarter to $1.68m, while his total compensation rose to $21.6m (£14.8m) – more than five times the 2014 total. That included $16.8m in long-term incentive awards.

The pay increase was controversial not just because of its size, but because it came halfway through the year and was made without consulting major shareholders. It wasn’t until January of this year, as the rare-drugs specialist was putting the finishing touches to its £22bn bid for Baxalta, that it disclosed to its biggest shareholders that it had hiked Mr Ornskov’s salary six months earlier.

“Certainly quite a few of the main City investors would have voted against this remuneration report,” said Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, a top 20 shareholder.

“There was a general sentiment against the increase and the issue was that Shire didn’t consult with shareholders in advance of the increase, so it came as a surprise to the City.

“We have consistently had issues with the pay at Shire and this year in particular the issue was over the 25pc increase for the chief executive,” she said, adding that Royal London had voted against Shire's remuneration reports for the past four years.

Dr Ornskov’s salary will be frozen for three years, but investors criticised the “front-loaded” salary, which also ratcheted up his awards under the long-term incentive plan.

FTSE 100-listed Shire, which started life in 1986 when it started selling calcium supplements to elderly patients from above a shop in Basingstoke, justified the executive pay by saying it was crucial to ensuring that Mr Ornskov didn’t defect to another company, “given his attractiveness as a potential recruitment target”.

“It’s quite a remarkable vote,” said one shareholder. “Nearly 50pc sends quite a strong message to the board and certainly sends a message to the other companies that directors really need to listen to shareholders this year.”

Legal & General, which owns a 3.05pc stake in Shire, said last week that it was considering voting down the company’s remuneration report, although it wouldn’t disclose the way it voted.

Sacha Sadan, L&G’s head of corporate governance, voiced concerns last week about companies such as Shire making selective comparisons with rivals to justify their pay awards to executives.

However, other shareholders argued that Dr Ornskov’s salary needs to be in line with that of his global peer group and reflect the fact that since he became chief executive three years ago, the business has grown in value by $20bn.

"We have voted to support the company's remuneration policy because Shire needs to compete equally to recruit and retain the best talent in the context of its global biopharma peer group and we believe that this is in the interest of all shareholders," said one top three shareholder who did not want to be named.

Another shareholder said: “Dr Ornskov has transformed Shire and through his leadership, the team at Shire has accelerated its financial performance and delivered an exceptional total shareholder return of 128pc.

"The company is now well-positioned to become the global leader in rare diseases. The chief executive's remuneration package reflects this tremendous performance and, with its focus on rewarding long-term value creation, is firmly aligned with shareholder interests.”

A spokesman for Shire said: “We have engaged extensively with our major shareholders on the remuneration report and acknowledge the vote today. We remain firmly committed to a constructive and appropriate dialogue to fully understand shareholder views as we compete in a global market place.”

The shareholder vote was non-binding, and Mr Ornskov has already received his pay award.

 

"We have consistently had an issue with pay at Shire." Yea like how neuro makes higher base salaries than the OBU, how numerous people were told they couldn't get higher bases or negotiate their offers but we know neuro makes more. Yes this is an issue!

 

You are being paid to sell nothing! You might want to hold off on your complaint until you at least have a product to sell and you are generating some revenue.

 

I'm in the OBU, and would agree with this. No complaints and grateful I get a salary while I don't have a product to sell.

 

Thank you! And NBU is the engine running this company OBU!

 

Better get that engine tuned up. Especially after the incompetant narcissist ran it into the ground.

 

Who wouldn't smile if you made that money and never had to show in the office. Not in Boston that's for sure.

 

She's rigged the game because she has something on either FO or PS. Why else would you keep that headache around. That c^^t alienated a whole company in her first month on the job. Why the fuck would someone put up with all her antics if she didn't hold something on them? It's not like she's good, I mean she's not all that bright and her big ideas are pretty basic.

 

Her ideas are antiquated and tired. She doesn't care to update them because "they worked for her" a million years ago so why wouldn't they still? She's a dinosaur who doesn't get it.
Maybe other than paying this ridiculous salary we could put it into the launch/meeting and make sure it goes right, coverage is on point, and there are no major F ups.
One that isn't at a hotel that is falling apart, has edible food, and something to do around it that isn't Disney. Maybe treat is like adults we are and give us some damn free time instead of constant meetings that repeat themselves ad nauseum and check the box. (Yes I realize we are at work, but other companies do this all the time. Shire USED TO...oh but that's right PS doesn't trust us hence no Vegas or NOLA)
From people I've talked to this company sounded nice before KK and PS showed up. Free time and activities at meetings, hell the whole neuro FF doesn't actually work on Mondays and Fridays.
Now let the KK defenders start with their "You're getting paid without a product BS!" Yes I'm aware (docs are laughing saying come back when you have an actual product) and I'm milking every second because you know the minute this drug gets approved the busy work, trackers, and box checking will be off charts.

 

That huge grin Flem has is suspicious.

 

Best post I've read in a long time.

 

What do you think Flem does with all that money?

 

Keeps a certain VP quiet?

 

Should Flemming just shrug this off? The stock is doing well. Perhaps shareholders will get back at him?

http://www.ft.com/cms/s/0/d21a8120-0e03-11e6-b41f-0beb7e589515.html#ixzz47Y1rm9Fh
Shire chief shrugs off shareholder protests

Andrew Ward, Pharmaceuticals Correspondent

• Comments

©Bloomberg
Shire chief executive Flemming Ornskov brushed off shareholder protests against his $21.6m pay package even as the drugmaker revealed a surge in sales and profits.

Almost half of investors who voted at Shire’s annual meeting on Thursday rejected the drugmaker’s remuneration policy — one of the biggest in a series of shareholder rebellions over pay at UK-listed companies this spring.

Asked about the vote on Friday, Mr Ornskov told the Financial Times: “It’s up to my board to enter into that dialogue. My role is to focus on delivering results.”

Since he took charge three years ago, Shire’s stock has risen 119 per cent compared with a slight fall in London’s FTSE 100 index. The group’s status as one of the fastest-growing companies in the pharmaceuticals sector was reinforced on Friday by first-quarter results which showed a 15 per cent increase in sales to $1.71bn and a 15 per cent jump in operating profits to $544m.

Performance-related incentives and bonuses helped fuel a fivefold increase in Mr Ornskov’s total pay last year; but it was the 25 per cent increase in his fixed salary to $1.69m which most upset critics.

Shire’s board said the raise was needed to bring Mr Ornskov’s pay into line with peers in the pharma and biotech sectors “to ensure the CEO’s retention given his attractiveness as a potential recruitment target”.

The 58 year-old Dane would not comment on whether he had been approached about other jobs. He said he was “absolutely focused” on driving further expansion in Shire as it prepares to complete the $32bn acquisition of Baxalta.

Mr Ornskov said the transaction — the biggest in Shire’s 30-year history — was on course to close in early June, six months after his long pursuit of the US biotech company ended in an agreed takeover.

The financial benefits from the deal include the reduction of Baxalta’s high US corporate tax rate when it is absorbed into Ireland-based Shire.

While the deal is not a “tax inversion” of the kind that has roused controversy in Washington, there have been questions over whether it could be affected by a recent US Treasury clampdown on tax rules governing cross-border deals.

Jeff Poulton, chief financial officer, said Shire was still confident that the combined group would have a tax rate of 16-17 per cent, compared with Baxalta’s 23 per cent as a standalone company.

“We’ve been through all 500 pages [of the Treasury document] and concluded that it is not going to impact what we can deliver,” he added.

Shire’s increased first quarter sales were broadly in line with market expectations, while earnings-per-share of $3.19 were well ahead of analysts’ consensus forecast for $3.04. Growth came from newer rare disease drugs, such as those acquired from NPS Pharma last year for $5.2bn, but also from its older Vyvanse treatment for attention deficit hyperactivity disorder, which was up 22 per cent at $509m.

Shares in Shire closed nearly 2 per cent higher at £42.61 on Friday, although they are down almost a fifth in the past year after a sell-off in biotech stocks.

 

Good idea, cut bonuses and benefits and give yourself a raise!