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How much is too much for AstraZeneca?

How much is a chief executive worth? That’s a question that dogs the non-executive directors of all companies, but few more so than at AstraZeneca (AZN), where in March 2020 chief executive Pascal Soriot received a long-term share award worth five times his salary. In May, a booster worth a further 0.5 times had to be awarded after shareholders backed a more generous pay policy. The purpose was to “close the gap to market pay levels within the competitive global pharmaceutical talent pool” and this new policy was to last until 2023. 

During 2020, Soriot took some big risks. He committed AstraZeneca to help develop the Oxford vaccine and begin its mass production before it was approved. The grateful board thought they deserved another pay rise. But the Investment Association and several proxy advisers, together with some long-term investors, disagreed. They accepted that exceptional performance justifies exceptional rewards, but hadn’t that been achieved by paying him his minimum of £1.7m, his bonus of £2.3m and the award of more shares? Increases in the share price had pushed up the value of those being released from an award made three years earlier to over £11m. In 2020, he received £15.4m in total. Wasn’t that enough?

Apparently not. Not only had Soriot’s job become larger after the strategic $39bn acquisition of Alexion last December, but his team is “critical to future business success and increased scope of roles in light of significant activities arising from the Covid-19 vaccine development”, according to AstraZeneca’s non-executive directors. A share award worth 6.5 times Soriot’s salary was needed to continue to close “the gap to market pay levels within the competitive global and European pharmaceutical talent pool”. Soriot needs to know that he could end up with a more respectable £17.8m (assuming the share price goes up 50 per cent over the next three years), although it would be more realistic to consider his target pay. Under the new policy, it would be over £7m – still less than that of AstraZeneca’s European peers. 

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