Tying executive pay to company performance has been suggested by many during this economic downturn as large compensation packages have come under public scrutiny.
Valeant Pharmaceuticals International has added a layer of accountability in Chief Executive J. Michael Pearson’s salary structure.
A recent Wall Street Journal article highlighted the Aliso Viejo-based company as an example to all public companies.
“Mr. Pearson’s unusual pay package wins praise from compensation critics, who say it may offer a model for other public companies,” the article said.
Pearson was required to buy at least $3 million in Aliso Viejo-based Valeant stock, forgo routine stock grants and hold shares for a long period of time as a condition of accepting the Valeant job in early 2008.
Pearson succeeded Timothy Tyson, who had come under fire at the end of 2007 for losses and a lack of direction.
When Pearson took over, he began a restructuring that included deep job cuts, slashing research spending and shucking off many foreign operations.
Wall Street has liked what it’s seen. At recent check, Valeant’s shares are about double what they were when Pearson arrived. They also are near a seven-year high.
Pearson’s pay package was suggested by G. Mason Morfit, a director at Valeant and managing director of San Francisco-based ValueAct Capital Management, according to the Wall Street Journal article.
ValueAct, known as an activist hedge fund that presses management to make changes in the companies it invests in, is Valeant’s largest shareholder with a 22% stake.
Morfit told Pearson and two finalists for the Valeant job about his preference for a private equity model for executive pay because it aligned management incentives with investor incentives.
“Nobody was scared off,” Morfit said.
After Pearson became chief executive, he and other Valeant directors required new senior executives to buy large chunks of the drug maker’s stock. Because of that, Valeant’s potential executive pool is narrowed to “affluent risk takers,” the article said. Pearson said that he found already successful people who were willing to take less guaranteed upfront pay.
Valeant “wasn’t always on the cutting edge of pay practices,” the article said.
In 2003, directors of the then-ICN Pharmaceuticals Inc. sued founder and former chief executive Milan Panic to recoup a $33 million bonus. Panic, who was ousted by dissident shareholders, later agreed to repay $20 million.
Sybron Buy
I wrote a page 1 story last week about Sybron Dental Specialties Inc. settling a long-running patent lawsuit with a rival.
But the Orange-based maker of dental products isn’t just settling lawsuits,it’s also expanding.
Sybron, which makes braces, bands, crowns, elastics, dental implants, and root canal and other products, said last month that it acquired Coppell, Texas-based Axis Corp. for an undisclosed price. Axis makes rotary dental instruments, which are used in procedures such as fillings and tooth polishing.
Sybron President Daniel Even said Axis will continue to operate as a stand-alone business within Sybron’s dental products business.
As for news coming from Sybron’s settlement with Align Technology Inc. of Santa Clara, the two companies plan to work together on braces that treat complicated cases of crooked teeth.
Sybron’s Ormco Corp. orthodontic unit isn’t worried about possibly launching a device at a time when people are cutting back on elective medical and dental procedures.
“We still think there’s such a large population of treatable patients that chose not to be treated,” said Don Tuttle, Sybron’s president of specialty products.
Adult tooth-straightening work is pricey and generally isn’t covered by dental insurance. Tuttle said that adult orthodontic care, depending on the region where an orthodontist practices, generally runs from $4,000 to $12,000.
But Tuttle believes there is a market for people who can afford to fix their teeth but have shied away for reasons other than economic ones.
Bits and Pieces:
Irvine-based medical software maker Quality Systems Inc. said that its QSI dental division signed a contract with National Electronic Attachment Inc. of Atlanta. Under the deal, QSI will add National Electronic’s software attachment to help customers process electronic insurance claims B. Braun Medical Inc., a maker of infusion therapy and pain management products with a large Irvine operation, said it received an award from the medical-surgical business unit of San Francisco-based McKesson Corp. The award recognizes McKesson’s suppliers and vendors for meeting certain criteria, including sales profitability and operational efficiency Applied Medical Resources Corp., a Rancho Santa Margarita-based device maker, participated in an “innovation celebration” put on by Premier Inc., a hospital purchasing group with an office in San Diego Tustin drug maker Peregrine Pharmaceuticals Inc. said it received a two-year, $763,000 research grant from the National Institute of Allergy and Infectious Diseases to expand its study of anti-PS antibodies and their role in the treatment of viral hemorrhagic fever infections.
