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AstraZeneca's plan to pay chief executive Pascal Soriot up to £18.7m has been described as “excessive” by two influential shareholder advisers, saying his remuneration was already competitive compared to international peers.
The drugmaker last month submitted its pay proposal for Sirout, who would need to meet a series of targets, including new drug approvals, earnings per share and total sales, to get the maximum amount for his performance this year.
Since taking over in 2012, Soriot has transformed AstraZeneca into the second-largest company on the FTSE 100 behind Shell. The 64-year-old earned £16.9m last year after hitting most long-term targets, making him one of the best-paid CEOs on the blue-chip index.
When explaining the reason for its potential compensation hike in its annual report, AstraZeneca said the increase was “material if viewed in the UK context” but that “changes are necessary to increase competitiveness” against its US and European counterparts.
Glass Lewis and ISS, which make recommendations to shareholders on how to vote at annual meetings and on corporate governance matters, disputed the claim and urged investors to vote against the plan at AstraZeneca's annual general meeting on April 11.
Under the plan, Soryu could receive annual long-term performance-based incentive payments worth up to 850 per cent of his basic salary of approximately £1.5 million, compared to the maximum of 650 per cent under the current policy set in 2021. The bonus is worth up to 300% of his base salary, compared to 250% currently.
While ISS acknowledged that AstraZeneca has a “global reach, operates in a high-paying sector, with a well-respected CEO at the helm,” it said it remained concerned about “the scale of the increase.” She added in a report, a copy of which was seen by the Financial Times, that Soryu’s rewards were indeed “competitive with her European peers.”
In its assessment, Glass Lewis noted “the absence of convincing evidence that the CEO has been underpaid compared to his peers in recent years.”
Sorio already earns more than the heads of major European pharmaceutical companies. Lars Frørgaard Jørgensen, chief executive of Novo Nordisk, Europe's largest pharmaceutical group by market value, earned 68 million Danish kroner (£7.8 million) last year.
The intervention of the world's largest proxy advisers comes as CEO pay has become a flashpoint in the debate over how to persuade more companies to list in London. Julia Huggett, head of the London Stock Exchange, said last year that UK executives should receive higher pay as the stock exchange struggles to attract more companies.
Soryu's pay has previously proven controversial. About 40 percent of the votes cast at the group's annual meeting in 2021 were against the bonus plan, which is set every three years. Glass Lewis and ISS also recommended shareholders oppose this plan.
Last year, Michel Demarai, the head of AstraZeneca, defended Soriot's pay, telling the Financial Times that she was prepared to take “significant criticism” over it and that Soriot could earn more in the US. Many drug company executives in the US are better paid, with Dave Rex, the head of Eli Lilly, earning $26.6 million in 2023.
In recommending shareholders vote against the new proposal, ISS said it was “aware of the wider debate over pay standards in the UK, in the context of FTSE companies remaining competitive against their US counterparts”.
“The new policy reflects the need to be competitive in the global marketplace for talent and that our compensation is designed to reward performance,” AstraZeneca said.
The company also cited total shareholder returns that it said far exceeded “the average of our peers in Europe and globally.”