Vertex pushes back against shareholder transparency proposal
- Vertex Pharmaceuticals is pushing back against a shareholder proposal from two religious organizations that calls for the Boston-based biotech to disclose more information about its lobbying practices.
- Friends Fiduciary Corp., a Quaker organization, and the Benedictine Sisters of Mount St. Scholastica plan to present the proposal at a June 8 annual meeting of shareholders, citing a concern Vertex's lack of transparency represents a reputational risk for the company.
- Vertex, though, is urging shareholders to vote against the proposal, arguing in a securities filing that existing disclosures are sufficient and any further reporting would be "duplicative" and an "unnecessary burden."
A number of biotech companies have been facing down more active shareholder involvement of late, with battles erupting between Starboard Value and Depomed as well as between VenBio Select Advisor and Immunomedics.
Even Big Pharma hasn't been immune. Bristol-Myers Squibb recently added three independent members to its board and upped its stock buyback plans in an effort to satisfy demands from the activist investor Jana Partners.
While the proposal by the two small shareholders in Vertex is well below the level of those disputes, it's an example of how the drug pricing debate can trickle through to corporate governance.
Friends Fiduciary and the Benedictine Sisters are calling for Vertex to prepare an annual report disclosing company policy on lobbying, plus all payments on direct or indirect lobbying and grassroots lobbying communications. The groups also want to be informed about Vertex's membership in tax-exempt organizations that draft and endorse legislation proposals.
The reason? "We are concerned that Vertex’s lack of trade association lobbying disclosure, coupled with potential negative publicity for opposing drug price initiatives, presents reputational risks for Vertex," the shareholders write in the proposal.
In particular, the two cite the $2.5 million Vertex spent on federal lobbying in 2014 and 2015, as well as the company's pushback against a drug pricing ballot initiative in California. Data from opensecrets.org shows Vertex has spent more than $5 million on federal lobbying over the past four years.
Friends Fiduciary is also campaigning for greater transparency from nine other companies including Pfizer, reports the Boston Business Journal, which first broke the news about Vertex.
Vertex isn't having it, though. "Our board believes that the proposal’s additional detailed reporting obligation would be duplicative of existing disclosures and that it would impose an unnecessary administrative burden and expense on the company when sufficient disclosure already exists," the drugmaker said in the filing.
- Vertex SEC Filing
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