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The Group TTBF (Thinking about Takeda's Bright Future)
Chairman, Kazuhisa Takeda
Although the declaration of a state of emergency has been lifted, we must continue to be prepared for second and third waves of the COVID-19 pandemic. In order to coexist with the virus, wisdom and ingenuity should be expected of us all. In addition, companies and shareholders need to adapt and innovate in the emerging new environment.
The group TTBF (Thinking about Takeda's Bright Future) has decided to exercise its shareholder proposal rights to recommend a new outside director in order to improve Takeda’s weak corporate governance structure.
The following glaring weak governance issue is noted:
First, take a look at the CEO compensation table of four leading global pharmaceutical companies (Roche, Novartis, Pfizer and Merck) compared to Takeda:.
Takeda's $16 million compensation package ranks third, after Merck's $28 million and Pfizer's $18 million.
Merck's CEO compensation doubled over 2014-2015, and has since increased by an additional $3 million. Behind this is the strong contribution of Keytruda, an anti-cancer drug that was launched in 2014. Merck raised its ROE from 9.9 percent in 2015 to 38 percent, a remarkable improvement of 28 percentage points, dividend growth averaging 5.1 percent annually over 5 years, combined to result in Total Shareholder Return (TSR) of 75 percent. CEO Mr.Frazier's management capability has been valued highly, and consequently the board has suspended the company’s compulsory tenure and has asked him to stay on.
Over the past five years, TSR results were +31 percent for Roche, +31 percent for Novartis and +46 percent for Pfizer, but these 3 firms have lagged the market (S&P Index) performance which rose 57% . CEO compensations have consequently been lowered (although Pfizer and Novartis replaced their CEOs during the period under consideration).
Roche improved its ROE by 3.7 percentage points to 42.6 percent and increased dividend every year with CAGr of 2.7 percent owing to the strong performance of hemophilia drug Hemlibra worldwide. However, CEO compensation has been reduced reflecting the TSR result that lagged the market growth.
Lets look at Takeda!
Mr. Weber's remuneration of $16 million in 2018 had doubled over the four years since his taking post in 2015 and appears to have increased by another $2 million in fiscal 2019. If the estimated amount is accurate, it will surpass Pfizer to occupy a second place.
Mr. Weber over five years, has claimed to focus on rational selectivity and concentration, has attempted to improve performance by selling non-core businesses and valuable assets outside his focus areas, and laid off employees, predominantly in Japan. Despite his efforts, Takeda's latest ROE is mere 0.9 percent, down 3.0 points from 2015, dividends are unchanged but the payout ratio has exceeded 100 percent over the period, which are reflected in total shareholder return (TSR) of minus 27 percent. Takeda shareholders have suffered a total loss of 2 trillion yen in value since the Shire acquisition came to light. How is it possible that the compensation for such a CEO continue to increase enormously, against such appalling performance? If Takeda claims to be a truly global company, CEO should have been dismissed and required to abrogate misconceived incentive bonuses.
One major factor that has led to this situation is the lack of corporate governance which is the responsibility of the board, entrusted to monitor the pursuit of self-interest by its key employees.
We at the group "Thinking about Takeda's Bright Future" understand that Takeda's current management decided to pursue globalization of its business and remuneration structures, but neglected to improve its corporate governance to global standards, not superficially but substantively.
With this situation in mind, we, TTBF decided to exercise shareholder proposal rights to recommend an outside director candidate who has proven expertise and experience in strengthening corporate governance.
In consideration of the above, we urge our peer shareholders, to cast their votes for our shareholder proposal.
Thank you very much
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