Elan chief in line for £7m payoff

The Guardian Friday 26 August 2005

A leading shareholder group has criticised the troubled Irish drugs company Elan for increasing the amount its chief executive could receive in a takeover bid to some $13m (£7m). Elan has changed the contract of its boss, Kelly Martin, to pay him three years' salary and bonuses if the company is taken over.

City investors dislike such large multiples because it can lead to "payment for failure" if a company is bought at a cheap price when distressed.

Corporate governance specialist Manifest calculated that together with share options, Mr Martin would receive a total of $13.2m at the current share price, and noted that the norm in the City is to give a year's contract. Before the change to his contract, Mr Martin was entitled to two years' pay.

The shareholder group also criticised the company's disclosure policies, saying it seems to treat its American shareholders differently from its British and Irish investors by revealing the information on the US regulatory service.

"The announcement concerning the change to the chief executive's termination payment could be viewed by some shareholders as providing the chief executive with an additional incentive to work towards the sale of the company, and thus be potentially price-sensitive," it said in a note to its clients yesterday.

"Manifest believes shareholders should have been treated equally in the making of this announcement."

The controversy comes at a difficult time for the company after it was forced to withdraw its multiple sclerosis drug Tysabri from the market in late February. The drug had led to two deaths and caused serious brain disease in another patient. It had only been on the market for two months.

The withdrawal led to a slump in the share price. When the drug was shown to work well in treating MS, it saved the company from the threat of being overwhelmed by its debt.

A spokesman said Mr Martin's contract had been changed in December, before the Tysabri problems emerged.

 

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