Best shareholder engagement (large cap) Regeneron Pharmaceuticals
Regeneron Pharmaceuticals is not new to engaging with shareholders. It has been doing so extensively for a decade and has, like other large companies, sought to engage with holders of more than half of its stock.
In 2021, it conducted its engagement program as usual, through which it received initially positive feedback on potential design changes to the equity compensation awards for the CEO and chief scientific officer (CSO). But then major shareholders and both leading proxy advisory firms found fault with the pay quantum and/or design of the front-loaded performance share-unit awards granted in late 2020 to the CEO and CSO. This led to an average level of support of 66.8 percent for directors at the 2021 AGM.
‘While fully acknowledging these humbling results, this gave our board and management team an opportunity to analyze the reasons that had led some of our shareholders to vote against our directors, review our corporate governance profile with a fresh eye and design a strategy to appropriately respond to these concerns,’ the company writes.
Regeneron’s response focused on engagement, especially the involvement of directors, including the chairs of the compensation and corporate governance and compliance committees. This enabled the board to gauge shareholder views and assess potential governance changes. As a result, the board moved from a triennial to annual cadence for say-on-pay votes and reaffirmed a commitment to issue no further equity awards to the CEO and CSO during the vesting period of the front-loaded performance share units. These changes were highlighted in the 2022 proxy statement and in discussions with investors.
And it paid off: at the firm's 2022 AGM, its directors received average support of 90.3 percent. The 2022 say-on-pay proposal garnered 87.8 percent, up from 70.2 percent in 2020.
‘Effective shareholder engagement is a long-term proposition,’ says Richard Gluckselig, vice president, associate general counsel and assistant secretary. ‘You need to cultivate relationships… We use engagement as an opportunity to educate investors [about] who we are as a company, where we are trying to get to and why we do what we do – [to provide] a link between governance and strategy.’
