Shareholders tell AstraZeneca chief to amend pay deal

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The Independent Online

Some of AstraZeneca's leading shareholders are demanding that it amends proposals that could see the pay of its chief executive, Sir Tom McKillop, rise by 50 per cent this year.

Some of AstraZeneca's leading shareholders are demanding that it amends proposals that could see the pay of its chief executive, Sir Tom McKillop, rise by 50 per cent this year.

The investors are upset that an existing bonus plan allowed Sir Tom and other executives to meet many of their performance targets in 2004, despite a 30 per cent collapse in the pharmaceuticals company's shares.

One top 10 shareholder said the new five-year bonus plan under discussion must ensure there can be no similar mismatch between executive pay and share price performance in the future. The company raised earnings per share by an estimated 18 per cent in 2004, triggering some elements of the existing long-term bonus plan, which has run its five-year course. But the failure of two drugs due for launch last year sent the stock into a nosedive.

Sir Tom was paid £1.8m in 2003; his total remuneration for last year is due to be revealed in the company's annual report in March. The total possible is an estimated £2.5m if all the performance targets are met. Shareholders say the plans for the new scheme could take the maximum payout to £3.8m for 2005.

One shareholder said: "Our issue is the payments coming out of the existing scheme. This can happen from time to time, but it suggests the measures agreed at the time are not appropriate."

The shareholder said it wanted earnings-per-share targets to be downplayed and new total shareholder return targets to be emphasised in the new five-year plan. AstraZeneca said the proposals might be modified.

It does not appear there is widespread concern among investors over the proposed increase in Sir Tom's remuneration. Anne Fraser, the head of corporate governance at another top 10 shareholder, Scottish Widows, said: "AstraZeneca tends not to test the limits of shareholder tolerance in terms of remuneration. Its remuneration tends to have a Euro-centric flavour to it, even though most of its pharmaceuticals peers are based in the US."

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