Shire Pharmaceuticals yesterday became the latest company heading for a showdown with shareholders over controversial "golden goodbye" clauses it has included in directors' contracts.
The influential National Association of Pension Funds is urging shareholders to block the re-election of three directors to the board, including Matthew Emmens, who became chief executive of the drugs giant in March.
Shire is set for a rough ride at its annual general meeting next Thursday for defying the current trend by some boards to relinquish contracts which allow directors to take large pay-offs, usually worth two years' salary, if they are ousted in a company takeover.
Shire has moved two executive directors, Wilson Totten and Angus Russell, on to two-year contracts from 12-months ones. It is still negotiating the pay package of its American chief executive, but that too could contain a potential two-year pay-off.
The NAPF frowns on such contracts because they can reward directors for failure. It is pushing for an against vote rather than just an abstention because the "change of control provision has only recently been included".
Shire is also set to be targeted over the £4.3m pension top-up it granted its former chief executive, Rolf Stahel. Mr Stahel, who built Shire up into one of the world's leading drugs groups, left the company last year after a boardroom bust up, taking with him a total pay-off of £5.9m.
Pirc, the shareholder activist group, condemned the additional pension contribution. "Pirc considers that effectively amending a chief executive's terms and conditions on departure, to his benefit and without shareholder approval, is inappropriate," the body said.
Shire is unlikely to encounter serious opposition because 45 per cent of its shareholders are American, where pay levels are still a large multiple of their UK equivalents and directors are used to having a range of benefits in their contracts as a matter of course.
A spokesperson for Shire said: "We operate in the global pharmaceuticals industry and have to be in the US, where change of control provisions are pretty much expected."
The company said that in the event of a takeover, its directors would receive only two years' salary and bonus. Other benefits and pensions are not included in the severance contract.
Tesco, the UK supermarket group, is also heading for a row with its shareholders over the issue of two-year contracts at its shareholders' meeting on Friday.Reuse content