Swiss pay cap puts some execs in the soup

Cantillon:The outcome of the weekend referendum in Switzerland on executive pay will not be very welcome at Aryzta, the Swiss group that subsumed IAWS and where Irish man Owen Killian is at the helm.

Mr Killian received a compensation package totalling €3.9 million last year year. It was made up of a basic salary of 1.27 million Swiss francs (€1.1 million), on top of which he received a bonus payment of €750,000 and an award of 2.2 million Swiss francs (€1.8 million) under the company’s long-term incentive plan.

Generous as it was, it represented a significant comedown from 2011 when Mr Killian trousered €7 million when he was awarded a long-term incentive of 6.1 million Swiss francs on top of his base salary of 1.2 million Swiss francs,

It remains unclear exactly what the Swiss have voted for as the Government now has to turn the plebiscite into law and some of its import may be lost.

In Switzerland we say: the soup is seldom eaten as hot as it is served, commented Philip Mosimann, chief executive officer of Switzerland’s Bucher Industries yesterday.

But the general thrust is clear: to give shareholders a greater say in executive pay including an annual vote. Golden handshakes and farewells will also be banned as will bonus payments linked to mergers and acquisition.

The latter measure may have a particular impact on the acquisitive Killian who forked out €280 million of shareholder’s cash last month to buy the German bakery Klemme.

Politicians across Europe – but not Ireland – have been quick to jump on the Swiss bandwagon, calling for similar measures in their own countries.

We will be a long time waiting for comparable measures in Ireland, but in an ironic twist the Irish shareholders in IAWS who feared that the company’s decamping to Zurich would lessen their influence will now enjoy a level of shareholder empowerment that remains unthinkable at home.

Whiskey galore in New York case

Sidney Frank Importing Company, the US drinks distributor that is suing Cooley Distillery and its US owner, Beam, for breach of contract and various other wrongs, confirmed yesterday that it will be asking the jury in the New York court to award it $100 million if it is successful.

Sidney Frank claims that Beam and Cooley are refusing to honour a long-standing contract to supply it with the Irish company’s Michael Collins brand of whiskey, which the importer has been distributing in the US market.

Along with filing a complaint in the US courts, it also issued a press release yesterday outlining the basis of its case. Fundamentally, Sidney Frank is claiming that Beam is promoting Kilbeggan at the expense of the Michael Collins brand, as it believes that this is the best way of taking on the market leader, Jameson.

For its part, Beam, and its chief executive Matthew Shattock, is saying very little, other than to point out that it has been in commercial negotiations with Sidney Frank regarding the matter, adding that “while we don’t discuss the details of matters in litigation, we are confident in our position and that we will prevail”.

From this distance it is hard to judge just what is going on. Beam recently reported that Kilbeggan grew 1 per cent last year, making it one of the more modest performances of a group of brands the US company classes as “rising stars”.

None of Cooley’s other brands feature in this or its power brand division, which is made up of what would be more established names in the US market. Clearly it regards Kilbeggan as a priority from a marketing point of view.

However, that is not necessarily an indication that it wants to smother other brands, particularly if this is going to involve litigation.

Given that Beam’s position is that the matter is the subject of commercial talks, it may well be that Sidney Frank is using the threat of litigation to strengthen its hand in those discussions.

On the other hand, taking its press statement at face value, it does look like the company believes that it has a genuine grievance, so the whole issue may yet wind up in front of a jury in a New York court.

Elan sugars pill for shareholders

Ireland’s largest indigenous drugmaker Elan shows all the signs of panic.

It could be that the innovative dividend policy announced yesterday – where shareholders will receive 20 per cent of the company’s share of future royalty payments linked to sales of the blockbuster multiple sclerosis drug Tysabri following its sale to partner Biogen – was indeed the focus of company management at the very moment it sought to downplay shareholder expectation of a payout at the time the deal was announced.

It seems exceedingly generous on top of a $1 billion share buyback that would clearly also benefit existing investors – and eats away further at the company’s ambitions to diversify.

Of course, that statement was somewhat at odds with the reality, which is that the company has spent the last few years stripping away any vestige of diversification .

Then there is Royalty Pharma’s unwelcome $6.6 billion bid for the rump of the business. While the bid itself undoubtedly undervalues the company at this point, the approach can scarcely have been too surprising.

The complication for any takeout of Elan had always been the unwieldy agreements between it and a range of partner biopharma groups in its key drugs and drug candidates.

The effective failure of the bapineuzumab Alzheimer’s programme in which much time and hope had been invested, alongside the proposed sale of the Tysabri rights under the deal currently being considered by shareholders, effectively unravels most of those complicating features.

Given the chatter at the time of the Biogen proposal about MA activity, it seems unwise at best that Elan management chose not to disclose the Royalty approach when it updated shareholders on the buyback proposal.

It was always likely Royalty would disclose its interest at its convenience and, when it did so, Elan looked to be caught wrong-footed.

Kelly Martin and his team appear to be relying on the faith of shareholders in his leadership.

He has undoubtedly served the company well in the decade since he assumed control but transparency has never been a strong suit – and the company has no track record in the sort of acquisitions it now appears to be targeting. It’s all a big ask for shareholders.