AmerisourceBergen's activist investors fail opioid vote, build for future talks

AmerisourceBergen Corp.'s shareholders voted down a series of measures an investor group proposed to shine a light on the drug distributor's roles in the mounting opioid crisis.

Three proposals were presented at the company's March 1 shareholder meeting by members of a group calling themselves Investors for Opioid Accountability, or IOA. The coalition says they are bolstered by the "resounding support" and increased dialogue with other opioid makers and distributors.

IOA sought the appointment of an independent board chairman, the disclosure of certain incentive-based compensation clawbacks, and a report on risk and governance measures around the highly addictive pain medications.

The coalition, which says it represents about $2.2 trillion in invested assets, is led by pension manager the UAW Retiree Medical Benefits Trust and Catholic fund Mercy Investment Services and includes 44 members from asset managers to state pension plans and labor unions such as the International Brotherhood of Teamsters. Several IOA members are also involved in a recent shareholder push to link executive compensation packages to drug pricing controls.

Overall, 41.2% of shareholders that voted favored opioid governance disclosures, 37% supported an independent chairman and 34% favored clawback disclosures, which they say will help investors understand state investigations into opioid sales. The opioid risk disclosure proposal had the highest number of abstentions, with more than 9 million votes withheld.

The Interfaith Center on Corporate Responsibility, or ICCR, a faith-based funding group and member of the IOA, said 62% of independent voters were in favor of the opioid risk disclosure proposal. Some 52% of these voters supported disclosure of incentive compensation clawbacks and 49% backed the appointment of an independent director.

Independent voters were defined by the IOA as all the shareholders outside of Walgreens Boots Alliance Inc., ICCR Director of Communications Susana McDermott said in an email to S&P Global Market Intelligence. The pharmacy chain owns a nearly 26% stake in AmerisourceBergen, and as part of an agreement will always vote with the company, which recommended a "no" vote on all three resolutions.

Yet the proposals did get the backing of the governance advisory firms Glass Lewis and the Institutional Shareholder Services, McDermott said in the email. Their support meant that the favorable vote would be large, but the end result was much higher than expected, she said.

"The IOA membership comprises some big funds, but this result means that some hefty groups got on board to push this over," McDermott added.

The group's financial clout has nearly doubled since their fall 2017 launch with members representing $1.3 trillion in invested funds. That growth has drawn from several asset managers with significant funds and a number of international additions, Donna Meyer, director of shareholder advocacy for coalition leader Mercy Investment Services, said in an interview.

Time for dialogue, says IOA

AmerisourceBergen, along with the other big medical distributors, Cardinal Health Inc. and McKesson Corp., is the subject of mounting lawsuits and investigations into the opioid crisis, including a 41-state opioid probe and provisional measures from at least nine states to limit distribution.

"We appreciate this resounding support of AmerisourceBergen independent investors on proposals we believe are key to board accountability," IOA said in a statement. "There is no more important time than now for AmerisourceBergen's board to be responsive to its investor base, especially as it faces potential legal costs and reputational damage related to its distribution of opioids."

IOA said the company's board of directors has yet to meet with them to discuss the resolutions.

The company "has held multiple telephonic meetings with shareholder organizations and alliances, including IOA," AmerisourceBergen investor and corporate relations Vice President Keri Mattox said in an email. "The board has discussed the IOA's most recent request and intends to provide a forum for further engagement with a board member."

Cardinal was the first of IOA's targets to address shareholder resolutions in their own November 2017 meeting. The company announced that it would split the roles of chairman and CEO just two days before a shareholder vote on appointing an independent board director that ultimately failed.

Meyer said that since the meeting, Cardinal has been in contact with the shareholder coalition and discussions have been productive. McKesson has also sat down with the IOA, she added.

The IOA is also targeting drugmakers Johnson & Johnson, Pfizer Inc., Mallinckrodt Plc, Depomed Inc., Endo Pharmaceuticals Holdings Inc., INSYS Therapeutics Inc., Mylan NV and Pernix Therapeutics Holdings Inc.

Meyer said they have launched about 30 resolutions related to opioid controls and have been able to settle seven or eight of them through dialogue with the companies.

"We're having productive conversations with the drug companies," she said. "We're always glad to talk with the companies and reach an agreement to withdraw the resolutions. But some of them will go to vote, for sure."