CEO's pay rise shocking -- Elan shareholder
ELAN chief executive officer Kelly Martin's 25pc pay increase is "shocking" because the Irish drugmaker is losing money and the share price has dropped, a shareholder complained in a letter to the company's board.
Ib Sonderby, a Danish investor who owns two million shares, said there was a "massive disconnect" between pay and performance.
As of June 1, Martin's base annual salary rose 25pc to $1m (€778,000), and will drop to $750,000 in May 2012 when he becomes a company adviser until January 2013, according to an August 10 regulatory filing.
Elan last month reported that its second-quarter net loss widened to $213.1m from $68.2m after the company set aside $206.3m to settle US government charges linked to the sale and marketing of the Zonegran epilepsy treatment. Revenue fell 4.1pc. The shares have declined 8.3pc this year.
Sonderby said he got advice from a biotechnology compensation consultant.
"The CEO's latest salary increase is shocking," Sonderby wrote in the letter, posted on an activist investor website.
"Why has the company not performed this pay for performance analysis? How could they continue to increase the CEO's salary and give him a golden parachute while the company is in dire straits?"
If Martin is fired or if he resigns, he can still cash in stock options until January 2015, according to the filing. In either event, or if the contract expires, he is eligible for severance pay, the company said.
Martin, who began his role as CEO in 2003, received $800,000 in bonuses in 2009 after waiving his 2008 bonus amid a stock plunge of 73pc that year.
The stock has fallen 15pc from the beginning of 2009 until the close of trading last Friday.
Sonderby also wrote to the board last month, complaining about its oversight of Martin and pledging to "restore good governance" to Ireland's biggest drugmaker.
"Mr Sonderby has never shown any real interest in a dialogue with the company," Paul McSharry, an Elan spokesman, said today in an email.
Martin's pay is less that that of leaders of larger, more profitable UK drugmakers.
Andrew Witty, GlaxoSmith- Kline CEO, earned £948,000 ($1.48m) last year with a £2m bonus. AstraZeneca's David Brennan earned £973,000 in 2009, with a bonus of £1.17m.
The salaries don't include stock options.
In his letter, Mr Sonderby said his analysis showed Elan to be in the lowest percentile for performance over two to three years, while the CEO compensation increase was in the top percentile.
"I am asking the board to explain to shareholders the rationale behind this latest increase in CEO compensation," Sonderby said.