Pfizer shareholders reject activist’s proposed ban on exec stock options, back advisory vote

Pfizer shareholders reject ban on stock options

Pfizer Inc. shareholders on Thursday overwhelmingly rejected a proposal to stop giving top executives stock options, but the company’s CEO still took some heat over that issue and Pfizer’s low stock price and reduced profit forecast.

The vote on stock options came as the world’s largest drugmaker held its annual meeting in Cleveland. A preliminary total of votes cast in advance, covering about four-fifths of shares, showed 96 percent of shares voted were against the proposal and just 4 percent were for it.

The proposal was brought by outspoken activist shareholder Evelyn Y. Davis, who has been pushing for compensation reform at various corporate annual meetings for years.

“Stock options have gotten out of hand in recent years,” she told Pfizer CEO Jeff Kindler, adding that shares of stock could be awarded instead.

Davis said some stock analysts can manipulate earnings estimates, leading to “shenanigans” and fluctuations in the market.

Shareholders of New York-based Pfizer, the maker of impotence treatment Viagra and antidepressant Effexor, did vote to give themselves an advisory vote on compensation of top executives, with 97 percent of votes cast supporting that.

Shareholders also voted to re-elect members of the board of directors and to reappoint KPMG as auditors.

They also voted, 95 percent to 5 percent, to reduce the percentage of shares needed to call a special shareholder meeting, from the current 25 percent to 20 percent.

Pfizer management had supported that proposal, as a compromise to a previous shareholder proposal that would have reduced the level needed to 10 percent.

However, management opposed the one brought by Davis, who hijacked much of the meeting with criticisms and questions put to Kindler on topics including Pfizer spending on lobbying and lawyers. She even chided Kindler because the company’s proxy, the report summarizing company performance and listing the issues up for votes at the meeting, did not name her as the sponsor of that proposal. In general, proxies do identify sponsors of all shareholder proposals.

Davis said her proposal would have drawn more support if the proxy stated that she was the sponsor. Last year, 6 percent of shares were voted in favor of the same proposal.

Another shareholder requested that Kindler and top Pfizer executives volunteer for a pay cut until they boost Pfizer’s share price, which lags well below that of other major U.S. pharmaceutical companies. Kindler said the board would take that into consideration.

In midafternoon trading, Pfizer shares fell 8 cents to $16.52.

Earlier, Kindler told the shareholders Pfizer is still aiming for savings of $4 billion to $5 billion by 2012 from its $61 billion acquisition of drugmaker Wyeth last October. He said Pfizer is reinvesting those savings in drug development, promoting sales of established products, expanding sales in emerging markets and other areas.

“We believe this approach will provide for consistency of earnings,” Kindler said, with no one product expected to produce more than 10 percent of Pfizer revenue after the world’s top-selling drug, cholesterol fighter Lipitor, loses patent protection at the end of 2011. Lipitor, which already faces competition from generic versions of similar drugs, saw its sales dip to just below $11.5 billion, down from nearly $13 billion two years earlier, but sales will plunge far more once its patent expires.

“Let me be clear: We are still pursuing blockbusters,” Kindler added.

In February, Pfizer reduced its 2010 earnings-per-share forecast by 6 cents, to $2.10 to $2.20, excluding items, well below the $2.27 analysts were then expecting. Pfizer blamed the stronger dollar. It also lowered its forecast for 2012 — when Lipitor sales will get slammed by generic competition — from adjusted earnings per share of $2.42 down to $2.30.

Also, the company said it was keeping its quarterly dividend at 18 cents per share, payable June 1 to shareholders of record May 7.