AMERISOURCEBERGEN CORPORATION | Executive Incentive Compensation - Compliance Costs at AMERISOURCEBERGEN CORPORATION

Status
Withdrawn
AGM date
Resolution details
Company ticker
ABC US
Lead filer
The International Brotherhood of Teamsters (IBT)
Resolution ask
Adopt or amend a policy
ESG theme
  • Governance
ESG sub-theme
  • Remuneration or pay
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Health Care
Company HQ country
United States
Resolved clause
That shareholders of AmerisourceBergen, Corp. (AmerisourceBergen), urge the Board of Directors to adopt a policy that no financial performance metric shall be adjusted to exclude legal or compliance costs when evaluating performance for purposes of determining the amount or vesting of any senior executive compensation award. Legal or compliance costs are expenses or charges associated with any investigation, litigation or enforcement action related to drug distribution, including legal fees; amounts paid in fines; penalties or damages; and amounts paid in connection with monitoring required by any settlement or judgment of claims of the kind described above. Incentive Compensation is compensation paid pursuant to short-term and long-term incentive compensation plans and programs. The policy should be implemented in a way that does not violate any existing contractual obligation of the Company or the terms of any compensation or benefit plan. The Board shall have discretion to modify the application of this policy in individual cases and shall provide a statement of reasons to shareholders for any such individual modification.
Supporting statement
As an AmerisourceBergen shareholder, we support compensation arrangements that incentivize senior executives to drive growth while safeguarding company operations and reputation over the long-term. We believe this requires that the company adopt a policy that financial performance metrics should not be adjusted to exclude legal or compliance costs in evaluating performance for incentive payouts to senior executives. The policy is to provide the Compensation Committee with the discretion to exclude charges where it deems it in the interests of shareholders, although such situations should be accompanied by robust disclosure and justification. The need for this reform is amply demonstrated by the costly litigation AmerisourceBergen faces over the opioid crisis and last year’s Say-on-Pay vote. According to the 2021 proxy statement, AmerisourceBergen uses adjusted non-GAAP EPS and adjusted nonGAAP operating income in its short-term incentive program, and compound annual adjusted non-GAAP EPS in its performance share awards. In all three cases, the metrics are calculated to exclude litigation charges. In fiscal 2020, therefore, they excluded the impact of the company’s $6.6 billion opioid-related expense accrual – a charge that drove the company to its largest ever loss and exceeded cumulative earnings over the prior nine fiscal years. In the event, with the opioid charges excluded, the company’s short-term incentive program and fiscal 2018-2020 performance share awards paid out above target for the named executives. This led to a contentious Say-on-Pay vote at the 2021 shareholder meeting, where 48% of shares cast opposed the proposal. We believe that insulating senior executives from legal risks by removing associated costs from the metrics that determine their incentive compensation distorts incentives around compliance and undermines the alignment with shareholders. A superior approach to aligning executive pay with the company’s performance would be to include legal and compliance costs. We urge shareholders to vote for this proposal.

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