annual review indst 2024 public - Flipbook - Side 37
Annual Review 2024
CASE STUDY
AstraZeneca
We met the outgoing chair in 2021 and reviewed the
progress on CEO succession planning, again hearing
that the company was confident in its internal pipeline
given that the CEO had retained a strong executive
team. In 2023, we requested greater clarity over the
progress made, including how far the company had
gone to identify and develop internal candidates,
especially with the CEO’s 11-year tenure coming
under the media spotlight.
Changes at the company
AstraZeneca is one of Europe’s leading pharmaceutical
companies. In 2014, as part of its defence against the
Pfizer takeover bid, it announced an ambitious revenue
target. We engaged on the robustness of succession
planning and compensation alignment.
Our engagement
In 2014, we initiated engagement on the company’s longterm revenue target, which was the basis of its defence
against Pfizer’s takeover bid. We signalled the importance
of shareholders holding the board to account on this
commitment, and heard of the chair’s intention to tie
management incentives to long-term targets.
We held regular meetings with the company between
2015 and 2024, including with the chair, to ensure that
progress was made. We were given assurances over the
commitment to tie remuneration to the long-term strategy.
We encouraged the company to disclose performance
against confidential metrics in the long-term incentive plan
(LTIP), noting that this would provide transparency and
accountability while protecting commercial interests.
By 2019, the company had made notable improvements,
including the simplification of the bonus structure and
greater disclosure on targets, thresholds, performance and
outcomes. We also discussed succession planning for the
CEO. With the chair also likely to reach the end of his
tenure, we raised concerns about the senior independent
director’s capacity to effectively support the CEO
succession, given his additional roles as remuneration
committee chair, and CEO of another company.
We believed that robust succession planning at the CEO
and board level was essential to ensure strategy
consistency. While the CEO’s departure was still a few
years away, we highlighted our concerns, but heard that
the company was confident in its internal talent pool, and
that the CEO was focused on ensuring business
performance post-departure.
In April 2023, we welcomed the appointment of one of the
existing board directors as chair. We were also pleased to
learn that the company had achieved its ambitious target,
announcing annual revenues of US$45.8bn. In April 2024,
AstraZeneca became the UK’s largest public company by
market capitalisation.
Early in 2024, we met the new chair to gain an
understanding of the strength of the internal pipeline for
the CEO succession. We were pleased to hear that the
chair was working to ensure that candidates for the role
had gained experience across the business ahead of the
formal selection process. We obtained reassurance over
the diversity of this pipeline and that the company was
also looking at external candidates.
Throughout our engagement on CEO succession
planning, we raised concerns about the high level of
variable pay, which increased significantly as recently as
the 2024 AGM. The company had consistently justified
such pay levels to retain a high-performing incumbent in a
competitive global environment. We recognised the
global competition for talent, but were not convinced that
delivering such significant pay increases was warranted,
especially if a robust internal CEO pipeline was available,
as the company claimed.
This led us to recommend voting against the proposed
remuneration policy at the 2024 AGM. Afterwards, we met
the chair and obtained reassurance that a future CEO would
not necessarily be remunerated under such a generous
performance plan.
We also asked how the company would approach its next
phase of growth. The chair espoused a strong continuity
message, which was followed by the setting of another
stretching revenue target of $80bn for 2030.
Will Farrell
Theme co-lead: Climate Change
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