Two influential shareholders advisers have labelled AstraZeneca’s plan to pay CEO Pascal Soriot as much as £18.7mn “excessive”. They said his remuneration is already competitive with international peers.
Last month, the drugmaker announced its proposed pay for Soriot. He will have to meet a number of targets including new drug approvals and earnings per share, as well as total sales to get the maximum amount for his performance in this year.
Soriot, who took over AstraZeneca in 2012, has made it the second largest company on the FTSE 100 Index behind Shell. The 64-year old was awarded £16.9mn in last year’s pay after achieving most of his long-term goals, making him the highest-paid CEO on the blue chip index.
AstraZeneca, in its annual report arguing for the potential increase in his pay, said that the increase is “material” when viewed from a UK perspective but “the change are necessary to improve the competitiveness of the company” in comparison with US and European competitors.
Glass Lewis and ISS – which advise shareholders on voting at annual meetings and corporate governance – disputed this claim and urged AstraZeneca investors to vote against it at the annual general meeting of April 11.
Soriot would be eligible for annual incentive payments that are based on his long-term performance. These could amount to up to 850 percent of his base salary of almost £1.5 million , as opposed to the maximum 650 percent under the existing policy, which was set in 2021. He could also receive a bonus of up to 300 percent of his salary base, as opposed to the 250 percent he currently gets.
ISS acknowledged that AstraZeneca had “a global presence, was in a highly-paid sector and had a CEO who is well-respected at its helm,” but said it was still concerned by “the magnitude of the increase”. In a report seen by ISS, it said that Soriot’s compensation was already “competitive” against European peers.
Glass Lewis’ assessment noted that there was “no compelling evidence” to suggest that the CEO had been underpaid in comparison to peers over the past few years.
Soriot’s salary is already higher than that of the bosses at larger European pharmaceutical firms. Lars Fruergaard Jorgensen was the chief executive at Novo Nordisk – Europe’s biggest pharma group based on market capitalisation – and he received Dkr68mn last year (£7.8mn).
The world’s biggest proxy advisers have intervened at a time when CEO pay is a hot topic in the debate about how to convince more companies to list on the London Stock Exchange. Julia Hoggett was the London Stock Exchange’s head last year and said that UK executives need to be paid more in order for the bourse to compete with other companies.
Soriot’s salary has been controversial in the past. Around 40% of votes at the 2021 annual meeting were against the plan. The plan is changed every three years. Glass Lewis and ISS recommended that shareholders opposed this plan.
Michel Demare, chair of AstraZeneca last year, defended Soriot’s pay. He said that the company was ready to endure “major criticism”over this and that Soriot would earn more money in the US. Dave Ricks, the head of Eli Lilly in the US, will earn $26.6mn by 2023.
ISS stated that it “recognised the wider debate about UK remuneration standard, and the context of FTSE firms remaining competitive with US peers.”
AstraZeneca stated that the new policy “reflects the need to compete in the global talent market and our compensation structure is structured to reward the performance”.
The company pointed out that the total shareholder return was far above “the average for our peers in Europe, globally and worldwide”.