For years, Gilead has been embroiled in controversy for potentially engaging in anti-competitive practices that kept the HIV prevention drug, Truvada, unaffordable for millions
New shareholder proposal calls for a “Clawback” policy that would hold corporate executives financially accountable for misconduct – such as anti-competitive practices – by giving the Board of Directors the ability to recoup profits made as a result of wrongdoing
Clawback policies ensure misconduct is not rewarded and help companies limit risks and foster long-term sustainable growth
Following a class-action lawsuit alleging that Gilead, Inc., a pharmaceutical company engaged in anti-competitive practices to delay generic alternatives to HIV prevention and management drugs in order to charge exorbitant prices, today New York City Comptroller Scott M. Stringer and the New York City Retirement Systems (“the Systems”) announced a new shareholder proposal to hold senior Gilead executives accountable for potential misconduct. The shareholder proposal submitted to Gilead’s board of directors would, if adopted, give the board the ability to recoup or “clawback” compensation paid to senior executives as a result of misconduct or failed oversight – and help companies limit reputational and regulatory risks while fostering long-term sustainable growth. This is the first year that Comptroller Stringer and the Systems are calling for this reform at Gilead, Inc and comes as part of the partnership with Investors for Opioid and Pharmaceutical Accountability.
“Ethics matter – and companies should hold their employees accountable when they commit misconduct. There is strong evidence that suggests Gilead purposefully raised drug prices to exorbitant levels – and that people living with HIV were denied the medicine they need to survive. It’s outrageous and now the company is facing long-term consequences,” said New York City Comptroller Scott M. Stringer. “When Wells Fargo defrauded customers, a clawback policy held executives accountable. Money made as a result of misconduct should not pad the pockets of bad-actors – and clawback policies ensure that misconduct is not rewarded. As long-term shareholders, Gilead must prove to investors that they have substantive measures to hold executives accountable. It’s not just the right thing to do, it’s a smart policy to help set a proper tone at the top for ethical conduct and thereby promote long-term sustainable growth.”
The Comptroller and the NYC Retirement Systems’ proposal specifically urges the Compensation Committee of the Board of Directors to adopt a policy “to provide that the Committee will (a) review, and determine whether to seek recoupment of incentive compensation paid, granted or awarded to a senior executive if, in the Committee’s judgment, (i) there has been misconduct resulting in a violation of law or Gilead policy that causes significant financial or reputational harm to Gilead and (ii) the senior executive either committed the misconduct or failed in his or her responsibility to manage or monitor conduct or risks; and (b) disclose the circumstances of any recoupment if the circumstances of the underlying misconduct are public.”
In 2013, the Comptroller’s office successfully negotiated an expanded clawback policy at Wells Fargo. Three years later, following a letter from Comptroller Stringer, the board of directors used the expanded clawback policy to recoup $60 million from the company’s CEO and another executive in the aftermath of the Wells Fargo fake account scandal. Since 2014, the Comptroller’s office has filed 18 clawback-related proposals, which were enacted by 11 companies.
Comptroller Stringer serves as the investment advisor to, and custodian and a trustee of, the New York City Pension Funds. The New York City Pension Funds are composed of the New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System.
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