Mr. Schiller’s $9 million reasons to work cheaply

Valeant Pharmaceuticals is the type of company that tends to make even the simplest things complex.

The contract of Howard Schiller, its new chief executive officer, is evidence the first.

On January 6 Valeant’s board of directors gave Schiller the role of Interim CEO; the company previously had an hoc, three-man “office of the chief executive” created on December 28 in the wake of the disclosure that founder and then-CEO Michael Pearson had taken a medical leave of absence of indefinite duration.

Notwithstanding the fact that Valeant has become the most closely followed company in the capital markets–attributable in part to the Southern Investigative Reporting Foundation’s revelations of its hidden ownership of Philidor–it was reasonable to have expected a filing several days after Schiller’s appointment that disclosed relevant compensation package details.

But that announcement only came on February 1, three weeks after Schiller assumed control.

Schiller’s July 17 separation agreement–recall that the then-CFO resigned in April after the high-profile Allergan acquisition bid collapsed to pursue other interests–sheds some light on why he ran a besieged company for over three weeks without an employment agreement in force.

The July agreement paid Schiller $2,500 per month for consulting and allowed 100,000 “performance restricted stock units” to vest on January 31, 2016 — each unit converts into one freely tradeable share — giving him over $9 million worth of reasons to work (temporarily) for less than an assistant manager at a fast-food restaurant.

Why Valeant woudn’t state that Schiller’s employment agreement would be disclosed after his 100,000 units vested is unclear. An email seeking comment from the company’s public relations adviser, Sard Verbinnen’s Renee Soto, was not returned.

Seen narrowly, Schiller’s new contract appears fairly standard, paying him $400,000 per month for a two-month term ending on March 6. What happens then, however, is unclear. It certainly opens up a Russian nesting doll of questions: is Michael Pearson seeking to return? If so, will there be disclosure about the root causes of his multi-month absence? If he can’t or won’t return, what criteria is the board of directors using to evaluate Schiller in a 60-day period?

Despite having $9 million in salable stock and a handsome salary on top of that, the money is unlikely to be much comfort for Schiller given his looming appearance February 4 to answer questions about Valeant’s drug pricing strategy for the House Government Oversight and Reform Committee .

A February 2 memorandum from the committee’s Democrats suggests that Schiller’s welcome will not be a warm one. Containing some unflattering excerpts culled from the more than 75,000 documents Valeant produced in discovery, among other things it shows the company pursuing transactions simply for the ability to raise prices. The memorandum did not try to hide the Democrat’s contempt for Pearson, mentioning him eight times in the seven-page document.

Editor’s note: the initial version of this story contained two mistakes. The first misstated the amount of value from Howard Schiller’s restricted stock unit grant and the second inaccurately connected him to Valeant’s brief-lived “Office of the CEO.” 

The mistakes were mine and I regret them.

 

 

 

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