Pfizer CEO got $13.7 million in 2009 compensation
The chief executive of drug giant Pfizer Inc., Jeffrey Kindler, received a 2009 compensation package valued by The Associated Press at $13.7 million, down 7.6 percent from 2008, as the board reduced the stock awards he received, citing economic pressures.
The reduction happened even though Pfizer posted higher profit and sales last year amid a recession that has crimped even spending on medicine — and Kindler pulled off Pfizer's most valuable acquisition ever.
The world's biggest drugmaker paid Kindler, 54, a salary of $1.6 million, up just $25,000 from the year before. But his performance bonus was bumped up to $3.5 million from $3 million in 2008, according to a filing this week with the Securities and Exchange Commission.
Most of Kindler's compensation comes from long-term awards of stock options and restricted shares. The total fell 17 percent to $8.1 million in 2009, from $9.8 million, even though they were granted in late February, a month after Kindler announced plans to buy Wyeth for $68 billion, a sound strategy to counter Pfizer's looming revenue plunge.
Kindler's other compensation — a variety of perks — totaled $449,731. That included $190,725 for Kindler's use of corporate aircraft as required by Pfizer's board, $43,099 for use of a car, $7,690 for financial counseling and $1,217 for home security.
The Associated Press' compensation formula is designed to isolate the value a company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.
The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the SEC, which reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.
The proxy noted base salaries for top executives were frozen at the end of February 2009 for one year.
"The regular annual-term incentive grants awarded in February 2009 had a lower grant date fair value than those granted in 2008, reflecting the same macroeconomic concerns that led to the salary freeze," the proxy states.
Besides Kindler, the other top officers also got a smaller amount of stock awards.
However, Pfizer's chief financial officer, Frank D'Amelio, and Ian Reed, head of the worldwide pharmaceutical business, both got big awards right after the Wyeth deal closed in October. The half cash-half stock awards were valued at about $600,000 for D'Amelio and $500,000 for Read.
As of April 1, Kindler's base salary will rise to $1.8 million from $1.6 million. He is also in line to receive a bigger bonus for 2010 and roughly 50 percent more in long-term stock awards, with the board citing his "personal performance" and his "leadership of the Wyeth transaction."
The deal diversified Pfizer almost overnight from primarily a maker of blockbuster pills such as Viagra and cholesterol fighter Lipitor to a pharmaceutical company that's also a leader in biologic drugs, vaccines, animal medicines and consumer health products.
Still, Pfizer shares barely edged up, from $17.71 to $18.19 over 2009.
Pfizer, which added Wyeth blockbusters such as antidepressant Effexor and children's vaccine Prevnar to its pain relievers Celebrex and Lyrica, is in the process of cutting roughly 20,000 jobs from the combined work force and finding other ways to reduce costs.
That's because Lipitor, which produced about one-quarter of Pfizer's revenue at nearly $13 billion a year, will see sales plunge when it faces much-cheaper generic competition after November 2011.
Pfizer and most large drugmakers are facing so much generic competition in the next few years that the industry calls the situation a "patent cliff." Pfizer and rivals are trying to find new drugs to offset the anticipated loss of revenue and have been eliminating sales, manufacturing and other jobs that won't be needed.
The proxy includes two shareholder proposals that Pfizer stockholders are to vote on during their annual meeting, set for April 22 in Cleveland.
One, which states that "stock option awards have gotten out of hand in recent years," calls for the board to ensure no new stock options are awarded to senior executives and no existing stock options are repriced or renewed, unless a contract requires doing so. The proposal notes executives could be given stock shares instead. The board of directors unanimously opposes that.
Another proposal would give shareholders a nonbinding, advisory vote on compensation policies and procedures for the top company executives. The board is supporting that.
Shareholders will also vote on a company proposal to reduce from the current 25 percent of shares to 20 percent the level required for shareholders to call a special meeting of stockholders.
Last year, a shareholder proposal to allow 10 percent of shareholders that right drew significant support but failed. So the board this year is suggesting 20 percent as "a reasonable and appropriate balance between enhancing shareholder rights" and preventing a small minority of shareholders from disrupting company business.