Tomorrow’s shareholder vote on AstraZeneca PLC (LSE:AZN) boss Pascal Soriot’s compensation represents a microcosm of the broader debate around executive entitlement and the disparity in corporate values on both sides of the Atlantic.
Some argue that Soriot’s exorbitant pay package is an egregious affront to moral decency, while others, including some of AstraZeneca’s own shareholders, point to the US as proof that he’s actually underpaid.
What do the facts say, and what are the arguments from both sides?
The Pfizer pay gap
Soriot took home £16.85 million – comprising salary, compensation and bonuses – in total remuneration in 2023, having earned between £15 million and £16 million in the four years prior.
US biotech competitor Pfizer boss Albert Boula brought home a combined salary and compensation package of $21.56 million in the 2023 financial year, though this was comparatively low, historically speaking.
He missed a bonus because “Pfizer’s 2023 financial performance was below pre-established targets set at the beginning of the year”, per the remuneration report.
In 2022, Boula raked in more than $33 million, following $24.35 million in 2021.
The Pfizer-BioNTech COVID-19 Vaccine was evidently a shot in the arm for Boula; in 2019, he brought home just $17.9 million, though, with revenues surging 140% between 2020 and 2022, it’s at least unsurprising to see his wage go up.
Putting aside the moral objections to earning hand over fist because of a global pandemic, Boula’s compensation package has near-universal support among shareholders, receiving 92.8% and 92.7% of votes in 2023 and 2022 respectively.
A back-of-a-napkin calculation at today’s exchange rates shows that Boula has earned substantially more than Soriot in the past (72% more in 2022 and 22% more in 2021), though the gap closed to just 1.1% in 2023.
In terms of pay ratios, AstraZeneca’s CEO earned 182 times more than the median-paid employee. Pfizer's CEO? 262 times more.
What does this all suggest?
Putting aside the vast sums of money being earned on both sides (Soriot earns 1,000 times the UK minimum wage, after all), there is a case to be made that he’s been "massively underpaid", as top AstraZeneca shareholder Rajiv Jain, the chief investment officer at GQG Partners, said this week.
“There is a compensation issue at AstraZeneca,” said Jain. “The CEO is massively underpaid . . . given AstraZeneca’s impressive turnaround since he joined more than a decade ago.”
America’s investment class, meanwhile, doesn’t seem to give a hoot how much executives earn, even if their performance has been underwhelming.
Soriot’s US counterpart earns more, yet Pfizer has performed objectively worse than AstraZeneca. This is easy enough to quantify- AstraZeneca’s shares are up 79% in the past five years while Pfizer’s are down by a third.
Furthermore, as seen above, the pay ratio is astronomically higher at Pfizer.
Let's also not forget that back in 2014, Pfizer attempted to take over AstraZeneca at 535p per share; today, AstraZeneca is the more valuable company of the two.
Then again, Soriot already earns double Danish pharma giant Novo Nordisk (NYSE:NVO)’s CEO Lars Fruergaard Jørgensen’s pay, even though he’s overseen a walloping 390% increase in his company’s share price over five years, making it Europe’s most valuable corporation.
Shareholders also have mixed feelings about Soriot’s remuneration.
While Boula has the full support of voters, Soriot’s pay package is far more divisive, with just 60.2% voting to approve AstraZeneca’s remuneration policy in the most recent vote in May 2021.
There’s also another big factor to consider that gets to the rub of this whole executive pay debate.
In case you didn’t realise, the London Stock Exchange is losing members left right and centre. Even Shell PLC (LSE:SHEL, NYSE:SHEL), the FTSE 100’s largest constituent, is threatening to cut ties in favour of a New York listing.
This has more to do with how poorly companies are being valued by the British investing class, but persistent scrutiny over executive pay is probably feeding into the issue.
‘So what’, some will say, not least shareholder advisors Glass Lewis and Institutional Shareholder Services, who recommended voting against an increase to AstraZeneca’s remuneration. For them, and sympathetic British citizens, fairness and reason should not be sacrificed on the altar of the Square Mile.
We’ll find out tomorrow if shareholders agree or not.