Valeant said the CEO could instead get a smaller total annual grant, noting that the conclusion was partly based on investor feedback
Valeant Pharmaceuticals International Inc. intentions to kill a US$29.8 zillion stock award it offered Chief Executive Officer Joseph Papa since the company revamps its compensation system for senior managers.
Papa together with Chief Financial Officer Henry Herendeen, who both received huge upfront equity awards every time they were hired in 2016, will instead get smaller total annual grants, Valeant said Monday inside a regulatory filing, noting that this decision was partly depending on shareholder feedback.
Papa’s soon-to-be-cancelled accolade would have given him not less than 933,416 shares if Valeant’s stock price reached US$150 within 4 years, gaining more than 350 percent from the time of the grant as well as 10 times current levels. In the event the price eclipsed the top ceiling of US$270, the award may have yielded the CEO approximately 1.87 million stocks worth about US$500 million.
The scholarhip resembles those former President Michael Pearson received in 2011 and also 2015, which were set to pay out many times the target number of shares whenever Valeant had achieved goals pertaining to shareholder return. Theaward would have been worthy of US$2.66 billion if Valeant’azines share price reached at least US$1,181.81 on three separate goes between October 2019 and May 2020.
Equity awards that vest in the event that stock-return targets are met commonly are seen as friendly to shareholders. But they can also incentivize business owners to sacrifice long-term investments to drive a car up the share price, according to apaper by just David Larcker and Brian Tayan which study corporate governance within the Stanford Graduate School of Business.
Papa, who wasn’t awarded any fairness inand will get a US$10 million long-term incentive this season, is seeking to turn around the debt-laden business tainted by scandals including a controversial distribution model and price hikes.
Papa’s long-term encouragement will consist of stock options as well as restricted shares, some of which tend to be linked to shareholder return along with return on tangible capital. Herendeen will get a similar package priced at US$3.5 million, according to the registering.