Biogen Idec $BIIB: Proxy Score 41

BIIBBiogen Idec (BIIB) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/12/2013. had collected the votes of four funds when I checked on 6/8/2013.  I voted with management 41% of the time.  View Proxy Statement.

Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.

BIIB’s Summary Compensation Table shows George Scangos, CEO, was the highest paid named executive officer (NEO) at about $13.5M in 2012. I’m using Yahoo! Finance to determine market cap ($53.4B) and Wikipedia’s rule of thumb regarding classification. BIIB is a large-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9 & 10), using data from Equilar, the median CEO compensation at large-cap corporations was $10.8 million in 2010.

BIIB’s pay is above median when we factor inflation. It is also more than three times other NEOs, raising pay equity concerns, and exceeds IRS base deductibility limits by 24%.  Therefore, I against the pay package, bonus plan and stock plan.  I also voted against the members of the compensation committee: Robert Pangia (Chair), Alexander Denner, Eric Rowinsky and Lynn Schenk. 

There are three board members who have served for at least a 16 years and, more problematic, six board members serving on three or more boards. I voted against Stephen Sherwin, since I believe he cannot give the necessary attention to BIIB when he serves on six boards. I voted against Stelios Papadopoulos largely because Florida SBA did, I presume because of potential conflicts of interest and/or because of his service on the board of Nanogen, which filed for Chapter 11 bankruptcy protection in May 2009.

Of course, I voted in favor of my own for senior executives to retain a significant percentage of shares acquired through pay equity programs in order align their interests with the long-term interests of shareowners. This is simply good governance.

How I voted (CorpGov) below:

1.1Caroline D. DorsaForAgainstAgainstForFor
1.2Stelios PapadopoulosAgainstAgainstAgainstForAgainst
1.3George A. ScangosForAgainstAgainstForFor
1.4Lynn SchenkAgainstAgainstAgainstForFor
1.5Alexander J. DennerAgainstAgainstAgainstForFor
1.6Nancy L. LeamingForAgainstAgainstForFor
1.7Richard C. MulliganForAgainstAgainstForFor
1.8Robert W. PangiaAgainstAgainstAgainstForFor
1.9Brian S. PosnerForAgainstAgainstForAgainst
1.10Eric K. RowinskyAgainstAgainstAgainstForFor
1.11Stephen A. SherwinAgainstAgainstAgainstForAgainst
1.12William D. YoungForN/AN/AN/AN/A
2Ratify AuditorsForForAgainstForFor
3Ratify Named Executive Officers’ CompensationAgainstForForAgainstFor
4Approve Executive Incentive Bonus PlanAgainstForForAgainstFor
5Approve Omnibus Stock PlanAgainstForForAgainstFor
6Adopt Retention Ratio for ExecutivesForForForForFor

Stockholder proposals submitted pursuant to Securities Exchange Act Rule 14a-8 and intended to be presented at our 2014 annual meeting of stockholders must be received by our Secretary no later than December 31, 2013 to be eligible for inclusion in our proxy statement and form of proxy relating to that meeting.

  Looking at, special meetings can only be called by shareholders holding not less than 25% of the voting power; I think that should be 10%.

BIIB’s ISS Governance QuickScore as of June 1, 2013 is 2. The pillar scores are Audit: 1; Board 1; Shareholder Rights 3; Compensation 4. On is good; 10 bad.  Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosure.

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