In 2006, Pfizer’s CEO compensation issues represented an ideal case study on excessive pay for CEOs and the growing problem of irresponsible boards of directors.Mushrooming management compensation, unconnected to performance, is an obvious area where directors have failed the people they legally represent. At the time, Investors for Director Accountability screened the largest 1,000 American corporations in order to pinpoint the most egregious disconnects. Qualitative judgments were then applied. Long story short: Investors for Director Accountability concluded that shareholders should withhold their votes for the four nominees for the Pfizer Board of Directors who are members of the Board’s compensation committee. This would be a first step on a long road to restore director accountability to owners.
CEO Hank McKinnell had served as Pfizer’s Chief Executive Officer for five years. During that time frame his annual cash compensation had risen to $5,970,500 . Pfizer estimated the present value of Mr. McKinnell’s total compensation for 2005 at $15,880,989. The value of Mr. McKinnell’s direct holdings of Pfizer stock represented less than one month’s compensation. Pfizer’s compensation committee and its full Board had further seen fit to reward Mr. McKinnell with a $6.5 million per year retirement package for life. Average compensation for non-employee Board members had risen to approximately $200,000 per year.
At the same time, in the five years since Mr. McKinnell became CEO, Pfizer’s stock price had declined approximately 44% . A number of Pfizer’s leading drugs representing billions in sales were soon go off patent. Some investors believed Pfizer’s pipeline of new drugs is running dry and had raised serious questions about the future prosperity of the company.
Specifically, we suggested that shareholders withhold their votes for the four nominees for the Pfizer Board of Directors who were members of the Board’s compensation committee:
- Robert N. Burt
- Stanley O. Ikenberry
- George A. Lorch
- Dana G. Mead
Public company directors must remember whom they work for and act in the best interests of their shareholder owners. As a starting point, Investors for Director Accountability suggested that Pfizer shareholders specifically withhold their votes for these four men.
Additional resources are below.
Articles (in .pdf format)
Can’t Take it Anymore? by Gretchen Morgenson New York Times April 30, 2006
Investors vs. Pfizer: Guess Who Has the Guns? by Gretchen Morgenson New York Times April 23, 2006
Pfizer and the Proxy Adviser by Gretchen Morgenson New York Times April 21, 2006
Outraged Investors Unite On Overpaid Execs! by Cheryl Hall Courtesy of the Dallas Morning News April 9, 2006
Fund Manager, It’s Time to Pick a Side by Gretchen Morgenson New York Times March 26, 2006