Next week, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) will convene is general shareholders meeting, where it will ask them to approve raising the compensation for its directors and chairman Dr. Phillip Frost. The meeting will presumably be calm, and no objections are expected to the company's proposals, but some shareholders have found cause to disrupt the items on the agenda.
Platinum Investment Portfolio Management Ltd. CEO Gabi Haber today sent a letter to Teva's directors, calling on them to remove from the agenda the proposal to raise their salaries and approval of Frost's travel expenses by his private jet.
Teva's board of directors is asking to raise directors' salaries by an average of $76,000 per year to $190,000. This is in addition to NIS 2,000 for every board meeting to be left unchanged from previous years. At the same time, the proposal includes a salary hike for the chairman from $517,000 in 2011 to $900,000 this year. Frost is also entitled to receive annual travel expenses of $700,000 for using his private jet, and shareholders are being asked to approve an additional $298,000 bringing his travel expenses in 2011 to $1 million.
Haber told "Globes" that if Frost wants to attend Teva board meetings in his private jet then he should fund it himself. He said, "If not then the company could buy him a first class or business class air ticket for about $5,000 as is normal," said Haber.
Regarding the board of directors salaries, Haber said, "Teva has not grown in recent years. On the contrary, the company's market value has fallen. The shareholders are not satisfied with the company's results so there is no reason to raise the directors' salaries."
Teva says that the reason for raising the salaries is the need to attract directors of the highest professional standards but Haber is not convinced. "Even at $76,000 Teva had no problem filling the board and none of the directors would quit if the salary was left unchanged," he said.
This would not have happened under Eli Hurvitz
In his letter to the board of directors Haber writes that under the late Eli Hurvitz as chairman and CEO, the company reached tremendous achievements while maintaining relative modesty. "It is difficult to imagine that during his time it would have been possible to put forward the aforementioned proposal," wrote the CEO of Platinum, a boutique investment firm located in Haifa's German Colony.
Why are all the financial institutions that hold Teva's shares not complaining about the proposals on the agenda and only a small company like Platinum dealing with the subject?
Haber said, "We are focused on the investment funds of our clients, while it's possible that the large institutions have different interests to take into account, and for one reason or another don't want to make large waves. It's true that in relation to Teva's huge revenue, these additional expenditures of several million dollars won't bring it down, but from a public point of view it is not right."
Teva said in response, "Teva is asking to update directors' pay in direct proportion to the rise in activities and global expansion. The recommended level of pay, which is being brought for the shareholders' approval is not different from acceptable levels at global companies with a scale of operations and business revenue similar to those of Teva in the pharmaceuticals industry and in general."
Teva added, "In contrast to many other global companies, the rate of directors' salaries does not include an additional equity component, and hence the pay awarded to directors is clear, transparent, and agreed in advance, and proportionate in relation to the rate of the company's success, and their efforts to push the company forward."
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2012
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