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AstraZeneca has promised to increase its dividend this year, ahead of a major shareholder vote on whether to raise the pay of its long-time chief executive, Pascal Soriot, to as much as £18.7m.
The UK-based pharmaceutical company said on Thursday that it will pay a dividend of $3.10 per share for 2024, 20 cents higher than the 2023 dividend, “underscoring the company's confidence in its performance and cash generation.”
The increase in dividends is intended to compensate for the lower level of shareholder returns, compared to a period of flat growth over the past five years in which shares rose 78 percent, according to a person familiar with the plan. AstraZeneca's share price has fallen more than 8 percent over the past year. The unexpected increase in dividends per share is the company's first since a 3-cent increase in 2022. Dividends per share have risen just 10 cents since 2011, according to data from S&P Capital IQ.
The announcement comes ahead of the company's annual meeting on Thursday afternoon. While several shareholders have already cast their votes ahead of the meeting, the company will confirm later on Thursday whether a plan to raise Soriot's pay by £1.8m to £18.7m in 2024 has been approved.
The move was criticized by shareholder advisers Glass Lewis and Institutional Shareholder Services, but welcomed by some major shareholders, with Rajeev Jain, chief investment officer at GQG Partners, saying Soriot was “very underpaid” given the company's performance under his supervision.
Under the plan put to a vote on Thursday, Sorio could receive annual long-term performance-based incentive payments worth up to 850 per cent of his basic salary of approximately £1.5m.
This compares to the cap of 650 per cent under the current policy set in 2021. He will also receive a bonus of up to 300 per cent of his basic salary, compared to 250 per cent at present.
Glass Lewis, in a report to shareholders before the vote, said the increase was “excessive.” Investors have previously clashed with management over Soryu's wages, with nearly 40 percent of shareholders opposing a plan to raise wages in 2021.
But Jain told the Financial Times: “We have no problem with a CEO being adequately compensated when he delivers results, and in Pascal's case, we think the numbers are very clear, demonstrating the company's outperformance of the FTSE and its index.” Their peers, except for Novo Nordisk.
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Norges Bank, which runs Norway's sovereign wealth fund and is one of the top 10 shareholders, also revealed it would vote in favor of the pay deal, while another top 20 active shareholder said the pay deal should be compared with their US peers. CEOs often receive higher wages than Soriot.
AstraZeneca also sought to justify the changes by saying it was competing with its US counterparts. Like many European pharmaceutical companies, it makes a significant proportion of sales in the United States.
“The new policy reflects the need to compete in the global marketplace for talent, and our compensation is designed to reward performance,” the company said.
