Vertex shareholders say 'no' to sky-high exec bonuses
- In a recent "say-to-pay" vote, 55% of Vertex shareholders voted against one-time retention bonuses totaling $53 million, which CEO Jeffrey Leiden and other execs will receive if Vertex becomes profitable within the next three years.
- Whether or not Vertex becomes profitable largely hinges on whether or not the FDA approves its new combo drug, Orkambi (lumacaftor/ivacaftor), for treatment of cystic fibrosis (CF)-related F508del genetic mutations.
- Though Vertex has been profitable only once since 1991, its stock has risen 75% over the past year.
Were it not for the Dodd-Frank Wall Street regulation bill, which stipulates that companies provide shareholders the opportunity to participate in non-binding votes on executive compensation, the issue of Jeffrey Leiden's pay would not be headline news. In fact, last year, he made more than $36 million in a pay package worth up to $45.8 million. That pay has been slammed by some asset management consultants.
But even though 55% of shareholders voted against the "retention" bonuses, the vote is not binding and some shareholders are happy enough with the 75% increase in stock price to not worry about whether managers are being overpaid.
Another reason that the bonuses are considered over-the-top by some shareholders and onlookers is because of the $300,000 price tag attached to Kalydeco (ivacaftor), Vertex's approved CF treatment. Although Kalydeco has generated a great deal of positive feedback because of its unprecedented positive impact on patients with specific CF-TR mutations, its pricetag has also raised eyebrows.
Regardless, the stock is up, and the retention bonuses will be distributed if Vertex is profitable at least once in the next three years. Whether that happens or not, of course, is large dependent on approval of Orkambi.
- Boston Globe Record payout for Vertex chief panned in vote