SciClone Pharmaceuticals

SciClone Pharmaceuticals – Proxy Access

SciClone PharmaceuticalsSciClone Pharmaceuticals, Inc. (NASD:SCLN), whose product portfolio of therapies includes oncology, infectious diseases and cardiovascular disorders. Their annual meeting is coming up on June 9, 2016. had collected the votes of one fund family when I checked. Vote AGAINST pay, committee chair; FOR proxy access proposal. I voted with the Board’s recommendations 70% of the time. View Proxy Statement via iiWisdom.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value. 

SciClone Pharmaceuticals: ISS Rating

From Yahoo! Finance: SciClone Pharmaceuticals, Inc.’s ISS Governance QuickScore as of Jun 1, 2016 is 6. The pillar scores are Audit: 10; Board: 3; Shareholder Rights: 6; Compensation: 5. Brought to us by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures. That gives us a quick idea of where to focus: Audit, Shareholder Rights and Compensation.

SciClone Pharmaceuticals: Compensation

SciClone Pharmaceuticals’ Summary Compensation Table (p. 38) shows the highest paid named executive officer (NEO) was CEO Friedhelm Blobel, Ph.D. at $3.4M. I’m using Yahoo! Finance to determine market cap ($683M) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. SciClone Pharmaceuticals is a small-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at small-cap corporations was $2.7M in 2014, so pay was under that amount. SciClone Pharmaceuticals’ shares outperformed the NASDAQ over the most recent one, two, five and ten year time periods.

The MSCI GMIAnalyst report I reviewed gave Medivation an overall grade of ‘C.’ According to the report:

  • Unvested equity awards partially or fully accelerate upon the CEO’s termination. Accelerated equity vesting allows executives to realize pay opportunities without necessarily having earned them through strong performance.
  • The company has not disclosed specific, quantifiable performance target objectives for the CEO, essential for investors to assess the rigor of incentive programs.
  • The company pays long-term incentives to executives without requiring the company to perform above the median of its peer group. Incentive plans that pay for mediocre performance undermine the linkage between pay and performance.
  • The company’s failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO and directors may weaken the ability of equity awards to align executives’ interests with long-term value creation.

Similarly, Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measures  wealth creation in comparison to other widely held issuers. “Neutral” is the compensation rating given. On the actual compensation advisory vote, Egan-Jones concludes:

We believe that shareholders should support the current compensation policies put in place by the Company’s directors. Furthermore, we believe that the Company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, strongly aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and the enhancement of shareholder value. Therefore, we recommend a vote “FOR” this Proposal.

This is one of those rare instances where I voted “AGAINST” the pay plan but only voted against the chair of the compensation committee, not all members. Pay over median and policies that improvement were negative factors; outperformance helped on the plus side. Vote “AGAINST” the pay plan and Gregg A. Lapointe. 

SciClone Pharmaceuticals: Accounting

I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest — so voted to confirm.

SciClone Pharmaceuticals: Board Proposals

As mentioned above, I voted against the pay package and the chair of the compensation committee.

#3 Approve Qualified Employee Stock Purchase Plan. From the Egan-Jones Proxy Services analysis: 

An Employee Stock Purchase Plan or (ESPP) can be an important tool increasing ownership among company employees. In the US the tax advantages of a qualified plan are compelling, but qualifying for these tax benefits requires shareholder approval of the plan as well as several other structural elements, such as a minimum of 85% of fair market value as a minimum stock price and holding of the stock for a defined period of time. Egan-Jones supports the establishment of such qualified ESPPs unless there is a compelling example of prior abuse or significant reason to expect such abuse in the future.

We find no evidence of prior or expected future abuse of this ESPP and note that it appears to meet the requirements of a qualified plan. Thus we believe this ESPP to be in the best interests of shareholders, we recommend FOR this proposal.

I generally favor plans, such as SciClone Pharmaceuticals,’ that are open to all employees. An ownership culture provides great motivation and incentivizes employees to be fully engaged.

SciClone Pharmaceuticals: Shareholder Proposals

#5 Proxy Access. There is only one shareholder proposal on the proxy. The proposal is mine, so you can be sure I voted ‘FOR.’ Key provisions include allowing an unrestricted group of shareholder owning 3% of common stock over at least 3 years to place nominees totaling up to one quarter of the directors then serving or two, whichever is greater, on the proxy. Proxy access is the most important shareholder right that has to be won through a proxy vote. I’ve been working on this issue since before filing a petition with the SEC in the summer of 2002, which the Council of Institutional Investors said reinvigorated the debate. 

Directors are only really accountable to shareholders if they can be removed from the board and replaced with nominees of the shareowner’s choosing. Proxy Access in the United States: Revisiting the Proposed SEC Rule, a cost-benefit analysis by the Chartered Financial Analyst Institute foundProxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140 billion. If you vote only one item on the proxy, let it be FOR #5, proxy access.

SciClone Pharmaceuticals: CorpGov Recommendations Below – Votes Against Board Position in BoldProxy Insight

In addition to votes gathered by ProxyDemocracy.orgProxy Insight had reported votes of Canada Pension Plan Investment Board (CPPIB) and Colorado PERA, both of which voted all items on the proxy “FOR.”


1.1Elect Director Jon S. SaxeForFor
1.2Elect Director Friedhelm BlobelForFor
1.3Elect Director Nancy T. ChangForFor
1.4Elect Director Richard J. HawkinsForFor
1.5Elect Director Gregg A. LapointeAgainstFor
1.6Elect Director Simon LiForFor
2Ratify Named Executive Officers’ CompensationAgainstFor
3Approve Qualified Employee Stock Purchase PlanForFor
4Ratify PricewaterhouseCoopers Zhong Tian LLP as AuditorsForAgainst
5Proxy Access

Included in FocusLists Included in 1 FocusList: Proxy Access

SciClone Pharmaceuticals: Issues for Future Proposals

SharkRepellentLooking at for provisions unfriendly to shareowners:

  • No action can be taken without a meeting by written consent.
  • Special meetings can only be called by shareholders holding not less than 25% of the voting power.
  • No proxy access.

SciClone Pharmaceuticals: Mark Your Calendar

We welcome comments or suggestions from our stockholders. Stockholder proposals may be included in our proxy materials for an annual meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in applicable SEC rules. For a stockholder proposal to be included in our proxy materials for the next annual meeting of stockholders, the proposal must be received by Corporate Secretary, SciClone Pharmaceuticals, Inc., 950 Tower Lane, Suite 900, Foster City, California 94404, not less than 120 calendar days before the first anniversary of the date our proxy statement released to stockholders in connection with the previous year’s annual meeting, which date shall be December 30, 2016.


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.

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