How Much Is A CEO Worth? | In Genzyme's case, he's worth $14.6M
The biotech industry is certainly no different, with Genzyme Corp's CEO Henri A. Termeer being among a handful of biotech companies with fairly decent paychecks.
Money Bags
The question is: on what criteria does a company base its compensation and did the CEO meet it?
A peek into some of the company's most recent SEC documents shows Termeer earned a total compensation package for 2007 of $14.6 million. That number includes his base salary of $1.5 million and a cash bonus of $2.1 million for the high performance levels he met for himself and the company. It includes stock options with an equity value of $10 million.
So how did Genzyme's board determine what he was worth in 2007?
In its SEC document on executive compensation the company said it bases its compensation on the company's financial performance; its growth through acquisitions and new products it develops; strategic management of a complex, global business; expansion into new markets; good operations including investing in strong science and research, integration of acquisitions and developing a strong management team.
Whew!
How well Cambridge-based Genzyme does is becoming more and more important to the MetroWest region as the company now has several facilities in Framingham and Westborough, and plans to expand further. The state's life sciences bill included $12.5 million to beef up Framingham's infrastructure so the company can do so.
And how did Termeer meet those expectations?
Genzyme said there was strong revenue and income growth for fiscal year 2006; it acquired AnorMed Inc., which included a product that has shown great promise for stem-cell transplantation; some of Genzyme's existing key products saw strong growth; and it advanced many of its late-stage pipeline of products, which should translate into sustained future growth. But the company lost money for 2006 - $16.8 million to be exact.
Considering the year Termeer has had in 2007, one can only wonder how Genzyme will compensate him for 2008.
Icahn Showdown
First and foremost, Carl Icahn, the infamous corporate raider and private equity investor, bought Genzyme stock that added up to 1 percent of the company, creating rumors he might be planning a hostile takeover, as he so often does. At the very least, it was expected he would castigate management, in an attempt to get control of the company.
Icahn bought the stake in Genzyme in November of last year and by mid-February he had sold it: no public castigation of the company happened. Icahn just sold his shares, although at a very nice profit.
While it may never be known what transpired, if anything, between Termeer and Icahn, or their representatives, Termeer made it crystal clear that Genzyme wasn't interested in being acquired.
Once Termeer learned Icahn had bought a stake, he began a road show with analysts talking with them about the company being better off as an independent. I'm not sure how many companies have managed to dodge an Icahn bullet, but I would wager not many. I wonder how Genzyme's board will quantify what that's worth? Good luck board members.
And Genzyme's financial results for 2007 were pretty good. Its total revenue grew by 20 percent, which was driven across all segments of the company.
It also posted a profit for the year of $480.2 million, compared to a net loss of $16.8 million in 2006.
Marketing approval was obtained for four new products in the U.S., and there were two encouraging late stage product clinical trials: one for stem-cell transplantation and the other for multiple sclerosis.
Of course, the news is never is all good. Demand for the company's Thymoglobulin product, which is used to treat acute renal transplant rejection while a patient's immune system is being suppressed, continues.
But due to a manufacturing problem supply could not keep up with demand, although that problem has been solved.
As a CEO, Termeer certainly did nothing alone, but they're often judged alone. If he's only judged on the Icahn threat, Genzyme's SEC documents for 2008 compensation will be pretty interesting to read.
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