Vanguard and BlackRock split in a close vote on CEO pay at drug distributor AmerisourceBergen

Ever since Steve Collis became CEO of drug distributor AmerisourceBergen in 2011, shareholders had voted overwhelmingly in favor of how much he got paid.

That changed last week, after a group of investors challenged Collis’ $14.3 million compensation, and 26% raise, given him despite the billions the distributor is preparing to pay to settle nationwide opioid lawsuits.

At its March 11 annual meeting, Chesterbrook-based AmerisourceBergen eked out its narrowest win ever for a say-on-pay vote — which allows investors to give a symbolic thumbs up, or down, on the CEO’s paycheck. In the past, shareholders have routinely provided at least 90% support on the issue.

This year, 52% of shares voted went in the company’s favor, with 48% stacked against, according to figures released Tuesday in a regulatory filing. Two of the company’s biggest investors, Vanguard and BlackRock, went opposite ways on the vote.

“I’d find it hard to believe, that anybody at the company is considering this a victory,” said Douglas Chia, a fellow at the Rutgers Centers for Corporate Law and Governance who runs the consultancy Soundboard Governance. “This is not like a basketball game where a win is a win. This is clearly not.”

Two state treasurers — Shawn Wooden of Connecticut and Rhode Island treasurer Seth Magaziner of Rhode Island — led a campaign to vote “no” on Collis’ pay. They cited the board’s decision to exclude from its pay review the $6.6 billion charge the company put on the books as it negotiates an opioid settlement with state attorneys general.

The two treasurers are members of Investors for Opioid and Pharmaceutical Accountability (IOPA), a coalition of asset managers that includes the Pennsylvania state treasurer’s office, Philadelphia’s public employees retirement system, and the Sisters of St. Francis of Philadelphia.

Wooden and Magaziner said the close outcome represented “significant progress” by shareholders. “With a record number of investors rejecting the excessive pay-out for Mr. Collis,” Magaziner said in a statement this week, it’s “a clear signal that investors want more accountability at the company.”

AmerisourceBergen confirmed last week that it won majority support for its pay plan, but did not disclose the full result. After the company disclosed the breakdown of votes Tuesday, a spokesperson reiterated that AmerisourceBergen “remains focused on strong financial stewardship to the benefit of our shareholders,” as well as “our comprehensive and effective response to COVID-19,” noting the company’s involvement in vaccine distribution efforts in the U.S. and abroad.

The company “will also continue to work to achieve resolution of opioid matters in a way that seeks to meet the needs of patients, providers, our company and investors,” the spokesperson said.

As IOPA members have pushed shareholder proposals at the drug distributor in recent years, they have also acknowledged the difficulty of winning over a majority of investors, since Walgreens Boots Alliance, an AmerisourceBergen business partner, owns more than a quarter of the stock.

Between the next two biggest investors, Malvern-based Vanguard, with 8.3% of the stock, supported the CEO’s salary, while BlackRock, with 5.4%, opposed it.

State Street Global Advisors and JPMorgan Chase both declined to comment on how they voted. (A State Street spokesperson said the firm makes its voting record public on a quarterly basis. As of mid-February, State Street held 3.47% of the company, and JPMorgan’s asset management arm held 3.44%, according to the advisory firm Glass Lewis.

Vanguard said it “takes seriously the oversight of social risks, including opioid-related risks” in a bulletin published Thursday. The mutual fund giant also said it discussed the settlement charge with a board member, while also engaging with IOPA members on their views.

Ultimately, Vanguard supported the company’s payouts to executive, arguing the compensation was in line with returns to investors, and with pay levels at other companies.

BlackRock told The Inquirer last week that it voted against AmerisourceBergen’s executive pay. On Thursday the firm released additional commentary, saying it had concerns about decisions made by the board’s compensation committee, and voted against re-electing all three committee members.

“As was the case in this instance, we hold members of the compensation committee, or equivalent, accountable for poor compensation practices or structures,” BlackRock said.

When AmerisourceBergen released the executive pay plan in its January proxy statement, BlackRock said the compensation committee failed to describe whether it had even considered the opioid settlement costs in relation to CEO pay, and did not do a good enough job of addressing the issue in a follow-up statement this month.

“We believe the circumstances call for a robust explanation by the compensation committee of its decision not to exercise discretion to lower Mr. Collis’ payout,” BlackRock said.

The AmerisourceBergen spokesperson said the committee members “value shareholder feedback on the executive compensation program and encourage shareholders to share their perspectives throughout the year.”

According to Chia, the corporate governance consultant, the outcome of say-on-pay votes can end up posing the biggest risk to individual directors, who could get voted out of their board seat the following year. “For board members, that’s a very serious prospect,” he said.