Impertinent Question Department: When is “Performance-Based Pay”. . . Um, NOT? - 18 Dec 2008

Impertinent Question Department: When is “Performance-Based Pay”. . . Um, NOT?

December 18, 2008 · No Comments

Or, “What did the board say about compensation, just a few months ago?“

Regular readers will recall that, in May of 2008, Schering’s Board, and Compensation Committee (chaired by Hans Becherer), told us — in breathy tones, no less — that the Top Six at Schering would receive “no payments”
under the Long Term Performance Incentive Plan, for the five years
ended December 31, 2008 — if Schering’s stock price was the same on
December 31, 2008 as it was on March 31, 2008. That was a nice piece of public relations, at the time. It suggested that executive compensation at Schering was truly linked to performance. See this, from the most-recent Schering proxy statement (at page 22):

. . . .The outstanding
five-year transformational incentive (with a performance period ending
in 2008) uses total shareholder return (both actual and relative to the
Peer Group) as a performance metric. Stock price declines often
adversely impact total shareholder return. As a result, named
executives Hassan, Bertolini, Cox, Sabatino and Saunders may lose future compensation with respect to the transformational incentive if the stock price does not increase prior
to the completion of the performance period. For example, had the
performance period ended March 31, 2008 (rather than December 31, 2008
as provided in the plan), the payout would have been zero for each of them based on performance metrics of actual and relative total shareholder return. . . .

Unless, apparently, your name is “Tom” — as in Koestler, or Sabatino.

So, it now seems that the reality varies from the PR, in several significant cases — and especially if your name is “Tom”.

What has happened since the proxy was mailed? Well, Chief Science Officer, Dr. Koestler, and General Counsel Tom Sabatino, have each received significant, unscheduled interim

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