AstraZeneca, the FTSE-100 drugs giant, is facing a humiliating shareholder revolt over its chief executive’s pay package at a time of heightened tension over multimillion pound boardroom pay awards.
Sky News can reveal that the company has been warned by City institutions that they plan to vote against its remuneration report and policy at its annual meeting on 29 April.
Investors’ anger against AstraZeneca, which has faced a string of pay revolts in previous years, has been ignited by its refusal to reduce chief executive Pascal Soriot’s pension contribution to the average applied to its vast UK workforce.
The pharmaceutical group intends to cut Mr Soriot’s pension award from 30% of his £1.288m salary to 20% – still well above the average payment to employees.
Sources said that the Investment Association’s (IA) influential IVIS voting advisory service had applied a red-top alert to AstraZeneca’s pay policy, the strongest possible warning about a company’s behaviour, because of the pension award.
The IA signalled last year that it would take a hard line against companies which refused to align executives’ retirement contributions with those of their workforces.
AstraZeneca, however, has also sparked fury among shareholders on two other pay-related issues: its directors’ use of discretion to award Mr Soriot’s annual bonus and the decision to increase the maximum award under his long-term incentive plan from 500% of salary to 550%.
The latter point is expected to prove especially incendiary because of institutional investors’ vocal calls for public companies to demonstrate pay restraint during the COVID-19 pandemic.
Many companies, ranging from Balfour Beatty to Whitbread, have announced voluntary reductions in boardroom pay or contributions to charity.
AstraZeneca is not among the companies to have announced such a move.
One person close to the pharmaceutical giant pointed out that it had not sought government support to supplement employees’ salaries, cut its dividend or applied for emergency loans.
They added that AstraZeneca had also demonstrated its corporate responsibility by donating 9m face-masks to health authorities around the world, while it is collaborating with GlaxoSmithKline and the University of Cambridge to test tens of thousands of people for COVID-19.
Mr Soriot earned £14.3m last year, making him one of the best-paid bosses of a FTSE-100 company.
The year before, he was paid £12.9m – a figure which prompted an extraordinary outburst in an interview with The Sunday Times, in which Mr Soriot said:” The truth is I’m the lowest-paid CEO in the whole industry,” he said.
“It is annoying to some extent.
“But at the end of the day it is what it is.”
AstraZeneca is no stranger to shareholder revolts on pay.
In 2017, almost 39% of investors opposed its remuneration report, while the figure the following year the figure was only marginally lower, at just under 35%.
A repeat of earlier rows is likely to increase pressure from City investors for a boardroom shake-up.
While AstraZeneca’s financial performance has improved during Mr Soriot’s seven-and-a-half-year tenure, and its total shareholder return is industry-leading, some investors believe it pays scant regard to effective corporate governance.
In 2014, US pharmaceutical giant Pfizer abandoned a near-£70bn takeover bid for AstraZeneca amid pressure from the UK government.
The Anglo-Swedish company subsequently annoyed investors by refusing to link executive pay to targets set out as part of its takeover defence.
AstraZeneca recorded more than $24bn in revenue last year, and employs more than 70,000 people around the world – over 3000 of whom have a PhD.
The intensity of any pay revolt against AstraZeneca this month may be diminished by the fact that investors are being barred from attending forthcoming company meetings in person because of the coronavirus pandemic.
In the company’s annual report, Graham Chipchase, the non-executive director who chairs its remuneration committee, wrote: “I met 16 of AstraZeneca’s top shareholders over the course of three months to discuss our proposals and was pleased with the level of engagement, feedback and support received.”
Leif Johansson, AstraZeneca’s chairman for almost eight years, is expected to step down within the next 18 months.
AstraZeneca and the IA declined to comment on Thursday.