Pfizer...s Compensation Heads Under Fire More Than 20 Percent of Shareholders Withhold Support for MIT Corporation Chair Mead
By Gretchen Morgenson
THE NEW YORK TIMES
Shareholders of Pfizer voted to elect all 13 of the company’s directors at its annual meeting Thursday, rebuffing recommendations by a shareholder activist group and two proxy advisory services to withhold support from the board to protest its executive pay practices.
But two directors on the board’s compensation committee received opposition from more than a fifth of the votes cast in Thursday’s election, indicating that executive pay is of concern to a substantial group of Pfizer shareholders.
The annual meeting in Lincoln, Neb., where Pfizer has a large animal health manufacturing plant, featured a presentation by Hank McKinnell, the chief executive, who said that the company had “more than turned the corner” in research and development. With more than 150 new medicines in the pipeline and more than 80 other projects under way, Mr. McKinnell told the approximately 150 shareholders in attendance: “Pfizer is succeeding in finding, developing and bringing forward the innovations that bring hope to patients, jobs for communities and value for investors.”
During a question and answer session, however, Pfizer’s directors and executives encountered several shareholders dismayed over Mr. McKinnell’s pay. Since he took the top job at Pfizer in 2001, Mr. McKinnell has received $65 million in compensation and will receive an $83 million pension when he retires. During his tenure, Pfizer’s shares have lost 46 percent of their value.
Rajesh Kumar, an orthopedic surgeon from Lincoln who said he was a Pfizer shareholder, asked from the floor why Mr. McKinnell received in two days what he as a doctor earned over the course of one year.
Dana G. Mead PhD ’67, the chairman of Pfizer’s compensation committee, replied that Mr. McKinnell’s pay was based on market forces and reflected the breadth of responsibility assumed by the chief executive in overseeing 110,000 employees.
Mr. Mead, the chairman of the MIT Corporation, the institute’s board of trustees, was one of two Pfizer directors who received substantial opposition from shareholders, according to the company’s preliminary statistics. Some 21.7 percent of the shares cast withheld support from Mr. Mead while 21.3 percent withheld support from George A. Lorch, the chairman emeritus of Armstrong Holdings, the manufacturer of floor and ceiling materials.
At last year’s meeting, 2.84 percent of shareholders withheld support from Mr. Mead, and 2.91 percent withheld support from Mr. Lorch. Shareholders of public companies cannot vote against a director. They can either vote in favor of a board member or withhold their support.
Frederick E. Rowe Jr., president of Investors for Director Accountability, a month-old organization of businesspeople and investors that urged Pfizer’s shareholders to withhold support from all four of the board’s compensation committee members, said that he was pleased with the shareholder vote.
Mr. Rowe said that his only disappointment was that Mr. McKinnell did not offer to return some of his pension to the company’s shareholders. “He could have been a leader in something that every person in America knows is wrong, which is compensation is too high and compensation that goes up without performance is grossly unfair to shareholders,” Mr. Rowe said.
None of the seven proposals put forward by shareholders won support from a majority of votes cast at the meeting. But two were backed by almost 40 percent of the vote; one would have required separating the jobs of chief executive and chairman at the company, while another would have allowed cumulative voting of shares by holders. Cumulative voting allows small stockholders to aggregate their stakes and vote in any manner they choose — all for one director or in any combination.
Shares of Pfizer fell 11 cents Thursday, to close at $24.86.
Before the meeting began, a small plane flew over the hotel meeting site towing a banner that read: “Give it back, Hank!” A dozen or so labor union protestors stood outside the hotel chanting: “Hank McKinnell, rich and rude, we don’t like your attitude.”
Charlotte Luethje, a small shareholder from Roca, Neb., said: “I think the thing that bothers me most is that we keep talking about the differences in the haves and the have-nots. Take the oil companies, take the drug companies, you take whatever company you want. That’s where the big money is, in the C.E.O.’s.”
Paul Fitzhenry, a Pfizer spokesman, said the meeting showed that the company listens carefully to its shareholders and has responded with significant changes, including a stronger link between pay and performance. “There remains more to be done,” Mr. Fitzhenry said, “and we’ll continue to be responsive to shareholder concerns.”
Of eight shareholders interviewed before and after the meeting, only one supported Mr. McKinnell’s pay. But he declined to identify himself.