Should Fred return the cash? That's the question raised byForbes, which notes that the bonus would have been "endangered" had the Enhance study of the Vytorin and Zetia cholesterol pills been released in November 2006 or March 2007 as had been expected. The final release earlier this year has caused a sharp drop in the use of the two drugs and in Schering-Plough's stock price.
"It would certainly make me want to investigate the situation further, particularly if I was shareholder," Paul Hodgson of The Corporate Library, a corporate governance research firm, tells the mag. "It would seem to me that given Hassan's reputation for open-mindedness in terms of compensation, that if there were some doubts about whether he should receive a bonus, he would be more likely than others to voluntarily forfeit it. There are not many CEOs I'd say that about, but he would be one of them."
So far, though, Fred hasn't indicated any interest in doing so. Meanwhile, Enhance lead investigator Kastelein of the University of Amsterdam believes if he had full control over the study, the results could have been presented in March 2007. That would have put a set of cash bonuses for 2007 at risk if it had hurt sales and earnings per share, potentially costing Hassan $4 million more, Forbes writes.
Unless Schering's stock takes off before year's end, the mag continues, Hassan will miss out on a five-year incentive plan that is based solely on Schering's total shareholder return outpacing both pharma and the broader markets. But as we have already noted, Hassan's new stock options are already in the money. Schering's board has claimed that the stock price is artificially low but, says Hodgson, "if they really believe that's artificially low, they should have awarded premium price options."
UPDATE: Sue Wolf, Schering-Plough's corporate secretary, vp for governance and associate general counsel, has spent the morning posting a reply to any site that mentioned the Forbes piece. You can see what she wrote - and what she glossed over - by clicking on comments below. One thing she writes is that "market capitalization...was not a performance metric for any incentive plan since Fred joined Schering-Plough." However, Shearlings Got Plowed reminds us that, in fact, the drugmaker did use market cap as a metric in 2006, according to the 2007 proxy (please see page 25).