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Shareholders Question Executive Pay at Pfizer

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At the annual meeting of Pfizer shareholders, some attendees plan to protest the pay package for the company's chief executive. According to critics, Pfizer has changed the way it pays top executives to justify high levels of compensation. The company's stock is hovering near a seven-year low.

STEVE INSKEEP, host:

And, if oil company profits get you steamed, well, let's consider executive salaries. Some shareholders attending drug-maker Pfizer's annual meeting in Lincoln, Nebraska, plan a noisy protest vote against the company's board of directors today.

They are angry at the directors for backing a pay package for the Pfizer Chief Executive; Hank McKinnell gets a package worth $65 million. He earned that much since becoming CEO in 2001, even though Pfizer stock is hovering near a seven-year low. NPR's Alex Markels reports.

ALEX MARKELS reporting:

Hank McKinnell has plenty of reason to be down in the dumps these days. His company is about to lose patent protection on its popular anti-depression drug, Zoloft. And Pfizer's biggest selling product, the cholesterol-lowering drug Lipitor, is also facing increased competition.

Last year, Pfizer took the unusual step of publicly downgrading its growth prospects, and it's done the same thing to McKinnell's salary. But that still hasn't stopped some shareholders from complaining.

Mr. FREDERICK ROWE (chairman of Greenbrier Partners, Dallas): the people we've talked to are absolutely, universally appalled at what's happened with respect to compensation, appalled at what's happened with this company, particularly.

MARKELS: That's Dallas money manager Fred Rowe. He's been asking shareholders to voice their disapproval with the people who decide how much Pfizer pays its top executives.

Mr. ROWE: What we want to do is hold directors accountable for overpaying chief executive officers; and, to that end, what we've urged people to do is withhold their votes for the Pfizer board members who are also on the compensation committee.

MARKELS: Rowe and other shareholder activists say McKinnell's pay package is a prime example of the disconnect between how an executive performs and how that person is paid. Take the money set aside for McKinnell's retirement: 6.5 million a year for as long as he lives.

Ms. NELL MINNOW (Editor, The Corporate Library): It has absolutely nothing to do with his performance, which, at least during the last five years, has been abysmal.

MARKELS: That's Nell Minnow. She's the founder of the watchdog group, The Corporate Library.

Minnow says Pfizer's board used to be considered a leader in responsible governance, but that changed earlier this year when it revamped the way it compensates top executives.

The board cut the length of time over which it measures part of McKinnell's performance from five years to three. Minnow says the change could make it easier for McKinnell to earn the 5.5 million dollar long-term payout he took home last year.

Ms. MINNOW: What they've done here with this compensation plan is they've essentially changed the rules to make sure that he continued to hit his numbers. The problem is that there are compensation consultants who are retained by companies who can find some way to tell you you're doing a great job. All of the CEO's are like the children and their like woebegone; they're all above average.

MARKELS: That's not how Pfizer's lead director, Stan Ikenberry, sees it.

Mr. STAN IKENBERRY (Lead Independent Director, Pfizer Corporation): All of the compensation, both for Hank McKinnell and other members of the leadership team at Pfizer, is based on and linked tightly to performance. This past year, for example, was a tough year for Pfizer, and Hank's compensation went down by about 25 percent.

MARKELS: Ikenberry said the board recently changed Pfizer's bylaws to ensure shareholders, like the ones headed to Lincoln tomorrow, have more say on issues like executive pay.

Not that it matters much for shareholders with the loudest voices, the institutional investors who own the bulk of Pfizer's stock.

Prudential analyst Tim Anderson says he and the mutual fund managers he advises pay attention to bigger numbers.

Mr. TIM ANDERSON (Analyst, Prudential Securities): All of these companies, at least the ones I cover, are generating profits of several billion a year. And executive compensation just doesn't move that bottom line.

MARKELS: That fact probably won't reduce the grief McKinnell will get from shareholders at today's annual meeting. But he does have a few things to feel good about.

Pfizer is expecting FDA approval of a new stop-smoking drug, as well as a sleeping pill, which should at least keep him from losing sleep at night.

Alex Markels, NPR News, Washington.

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