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Investor revolt at Circassia over executive pay

Pharmaceutical company Circassia suffered a shareholder rebellion at its annual general meeting today after a fifth of investors who voted opposed its remuneration report.
Circassia is the latest in a string of publicly-listed companies to face shareholder opposition to what they deem to be excessive levels of executive pay.  Lloyds Banking Group, Paddy Power Betfair and Petrofac have all faced investor revolts this year, as well as Circassia’s pharmaceutical peers AstraZeneca and Vectura.
One healthcare analyst said: “This is not exceptional in the sector at the moment - we have seen similar shareholder pushback at other UK pharma companies lately.”
Shareholders objected to the pay packets awarded to Circassia’s top executives. Steve Harris, the company’s boss, enjoyed a 79.7pc rise in his annual salary to ?825,000, including pension contributions. His basic pay increased by 3pc to ?410,000, while his annual bonus for 2017 totalled ?307,000, reflecting 75pc of his salary. Mr Harris' long-term bonus was ?45,000. 
The year before, no one in the company received bonuses because of a massive plunge in Circassia’s share price when its key cat allergy treatment flopped in final clinical trials in June 2016.
Circassia 1-year share price
Although the share price has not improved since then, Circassia has made significant progress over the past year in turning the business around to refocus on respiratory drugs. As a result, Circassia's sales doubled in the year to December 2017 to ?46.3m, but it still made a loss of ?113.6m.
Despite this progress, ISS, an investor advisory group whose recommendations are widely followed by shareholders, urged investors to vote against the remuneration report ahead of the AGM.
It argued that large bonus payments had been made with limited disclosure and in a year when so much shareholder value had still been lost.
“Although progress has been made with the new strategy, the company's share price hasn't recovered from the poor phase three results for the cat allergy treatment and there hasn't been much share price response to the new strategy," it said.
Investor revolt at Circassia over executive pay

Circassia's allergy vaccine against cats failed spectacularly in June 2016
ISS also questioned why basic salaries had increased by 3pc a year since the company listed in 2014 without “sufficient justification”.
It pointed out that 9pc of the long-term bonus that was awarded in respect of 2017 was down to Circassia’s cat allergy drug completing phase three trials, despite the failure of these trials.
“It raises questions about the alignment between pay and performance,” ISS said.
Another advisory group, Glass Lewis, told investors to back the report.
Mr Harris said he didn’t see anything controversial about the remuneration report and did not agree with ISS' "nonsensical" recommendation.
Investor revolt at Circassia over executive pay

Steve Harris, chief executive of Circassia
He also said that the remuneration structure was put into place before the failure of the cat allergy treatment and going against it, or changing the policy's structure, would “probably  go against employment law” and require a shareholder vote.
“We feel comfortable that we followed all the corporate governance requirements and rules, I don't know what more we could have done," he said.
"This year we met certain objectives and the board felt we turned the business around and deserved the bonuses. If you follow the rules and meet the requirements, remuneration happens automatically. It is not discretionary."
He added that the board would consider shareholder feedback and the remuneration committee would take the non-binding vote "very seriously".
"If something is wrong, I'm sure the remuneration committee will correct it," he said. 
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