Activist investor Starboard cries foul play in exec U-turn at Pfizer
Starboard has accused Pfizer of “coercive conduct” after executives who initially backed the hedge fund retracted their support. Starboard Value, which recently took a $1bn stake in Pfizer, has claimed “coercive conduct” following a U-turn from two former executives who had originally supported its vision to turn profits at the drugmaker.
Starboard had originally enlisted the services of Pfizer’s former CEO Ian Read and former chief financial officer Frank D’Amelio. Following news reports of their involvement, Read, who headed the drugmaker for nearly a decade, and D’Amelio issued a joint statement on 9 October, saying they had decided “not to be involved in the efforts of Starboard Value”, pledging their allegiance to current CEO Albert Bourla.
Starboard maintains that the two Pfizer veterans “expressed concerns about the trajectory of the business,” in an open letter to Pfizer’s board of directors on 10 October.
“Mr. Read and Mr. D’Amelio shared our desire to see Pfizer pursue a better path forward. Therefore, they offered to be of assistance,” the activist investor explained in the letter signed by managing member Jeffrey Smith.
The public retracement of support complicates the situation for Starboard, which is due to meet Bourla and Pfizer’s lead independent director Shantanu Narayen next Wednesday (16 October) to discuss the best strategic path forward for the pharma company.
Starboard alleges that the U-turn from the two executives might have come about under nefarious circumstances. The hedge fund points to “people within Pfizer” and potentially “their representatives” who threatened Read and D’Amelio with litigation, a clawback of prior compensation, and cancelling of unvested performance stock units unless a statement was released backing Bourla.
Starboard admits it cannot know if Pfizer’s board greenlit what it calls “coercive conduct,” and has asked the pharma to immediately establish a special committee of “board members with clean hands” to investigate the extent and root of the behaviour. “To be clear, we believe this behaviour is highly inappropriate, flagrantly unethical, and a significant breach of fiduciary obligations,” Starboard added in the letter.
