BRISTOL-MYERS SQUIBB COMPANY | Executive Incentive Compensation - Compliance Costs at BRISTOL-MYERS SQUIBB COMPANY

Status
Withdrawn
AGM date
Previous AGM date
Resolution details
Company ticker
BMY
Lead filer
Mercy Investment Services, Inc.
Resolution ask
Adopt or amend a policy
ESG theme
  • Social
ESG sub-theme
  • Public health
  • Remuneration or pay
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Health Care
Company HQ country
United States
Resolved clause
RESOLVED that shareholders of Bristol-Myers Squibb Company ("Bristol-Myers" or "the Company") 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 Incentive Compensation award. “Legal or Compliance Costs” are expenses or charges associated with any investigation, litigation or enforcement action related to drug manufacturing, sales, marketing or distribution, including legal fees; amounts paid in fines, penalties or damages; and amounts paid in connection with monitoring required by any settlement or judgement 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 specific circumstances for reasonable exceptions and in that case shall provide a statement of explanation.
Supporting statement
SUPPORTING STATEMENT: The Investors for Opioid and Pharmaceutical Accountability (IOPA), a coalition of 67 investors with $4.2 trillion in assets under management has been engaging companies on issues of good corporate governance for several years. As shareholders bear the financial impacts of legal settlements related to inadequate assessment of how business decisions would impact possible litigation, the IOPA believes executives should similarly be accountable for the financial impacts of those decisions.
Bristol-Myers (BMS) adjusts certain financial metrics when calculating progress for executive incentive compensation. While some adjustments may be appropriate, we believe senior executives should not be insulated from all legal costs as a matter of policy.
These considerations are especially critical for pharmaceutical companies because of the industry’s high legal and regulatory risks related to product safety and the industry’s commercial practices. BMS, in particular, is facing several concerning lawsuits, including:
A $6.4 billion class action lawsuit filed on behalf of former shareholders of Celgene Corporation who received Contingent Value Rights for violations of the federal securities laws.[1]A $75 Million, plus interest, settlement to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate Program[2]$11 million to settle a lawsuit that accused several drugmakers of conspiring to block generic competition to HIV medicines.[3]Companies that opt to align the interests of executive and shareholders through the structure of the executive compensation plan sever that alignment when litigation is simply cherry picked out of the calculation. Some firms have chosen to address this issue by voluntarily reducing CEO pay in response to large litigation fees. For example, following discussions with the IOPA and other shareholders, AmerisourceBergen, Cardinal Health, and McKesson reduced CEO pay in light of opioid-related litigation settlements. While the IOPA views the amounts of the reductions as less than warranted, we applaud the decision to acknowledge that incentives matter. We urge shareholders to vote for this proposal.
[1] https://www.fiercepharma.com/pharma/bristol-myers-loses-bid-toss-64-billion-cvr-lawsuit-tied-celgene-takeover-breyanzi-approval
[2] https://www.justice.gov/usao-edpa/pr/bristol-myers-squibb-pay-75-million-resolve-false-claims-act-allegations-underpayment
[3] https://www.statnews.com/pharmalot/2022/04/14/bristol-gilead-hiv-aids-antitrust/

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