Clawing Back Money from Bad Behaving Pharma Execs
April 5th, 2013 // 3:16 pm @ jmpickett
April 10 – Avoid the CDRH eCopy Chaos – How to Prepare a Compliant eCopy Submission
After years of huge payouts to settle allegations of fraud, shareholder lawsuits and ensuing negative publicity, a half dozen drugmakers have agreed to revise their compensation policies in order to make it easier to recover payouts to executives in hopes of deterring unethical or inappropriate behavior.
The move was undertaken in cooperation with 13 institutional investors in hopes of strengthening board oversight and preserving long-term shareholder value. The drugmakers that signed on include Amgen (AMGN), Bristol-Myers Squibb (BMY), Eli Lilly (LLY), Johnson & Johnson (JNJ), Merck (MRK) and Pfizer (PFE).
The institutional investors noted that many large companies have clawback policies, but are only triggered when there is a financial restatement and they seek to recover compensation that has already been paid. The new policy would “contemplate the recoupment of compensation that has not yet been awarded or vested.”
“Properly designed, compensation policies can be effective antidotes to compliance violations by affirming accountability that has real consequences,” Meredith Miller, chief corporate governance officer at the UAW Retiree Medical Benefits Trust, which led the effort. Adds New York City Comptroller John Liu: “These clawback principles give boards a mechanism to hold executives accountable for misconduct and compliance violations, which is especially important in highly regulated industries such as health care.”
So what exactly is involved? The revisions mean that not only would individuals response for compliance failures be subject to clawbacks, but also supervisors who failed to appropriately manage or monitor the risk.
And the policies will give board compensation committees “full discretion” to determine if a material violation of company policy related to the sale, manufacture or marketing of health care services, has caused significant financial harm to the company and should therefore trigger consideration of a possible recoupment of incentive compensation.”
Board compensation committee will decide whether to “clawback” incentive-based compensation already paid or otherwise recoup or reduce compensation that has not yet vested or has not yet been paid. And there will also be public disclosure regarding decisions to recoup compensation in compliance with SEC rules.
- April 10 – Avoid the CDRH eCopy Chaos – How to Prepare a Compliant eCopy Submission
- April 16 – cGMP Inspection Tips and War Stories – The Quality Manager Gets Fired, the $100,000 Compliance SNAFU, and 21 Tips and Tricks for Your Next Audit
- April 18 – Why You May Want to Move Your Pharma Company to Kansas – 483 and Warning Letter Trends
- April 25 – How to Survive PREDICT – FDA’s New Import Screening Program
- April 29 – Audit Your Lab Like an Expert FDA Auditor: A Roadmap to Lab Compliance
- April 30 – FDA Hands Out CAPA 483s Like Candy – Avoid Them With a Closed Loop CAPA SystemÂ
- May 1 – Avoiding Warning Letter Disasters With a Strong Contractor Quality Agreement
- May 7 – FDA Recall Chief Update – How to Design a Bulletproof Product Recall Strategy
