At today’s annual shareholder meeting for Abbvie (ABBV) a first-time shareholder proposal questioning the links between executive compensation packages and drug price increases received a solid show of support from investors, signaling to the board of directors that this issue is key to investor confidence about the long-term sustainability of the company.
This positive development is a result of investors in drugmakers who are also members of the Interfaith Center on Corporate Responsibility (ICCR) who submitted a resolution calling for more information on the relationship between executive compensation packages and price increases for medicines.
Investors view executive pay packages as a window into the quality of board decision-making. In the context of drug pricing, investors are eager to understand if companies are rewarding executives for short-term profit gains through drug price increases or rewarding longer-term investment in the company related to research and development and successful innovation.
“Abbvie’s strategy statement emphasizes a commitment to sustainable growth and our resolution sought to understand whether our executive incentive structures support this strategy,” said Katie McCloskey of United Church Funds and lead filer of the proposal. “An over-dependence on revenue sourced from price increases as opposed to drug discovery and innovation is not a sustainable growth strategy for Abbvie, and moreover, it has serious financial and health consequences for its millions of customers.”
Four other pharmaceutical companies received a similar proposal: Amgen (AMGN), Biogen (BIIB), Bristol-Myers Squibb (BMY) and Eli Lilly (LLY).
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