Ian Read, the chairman and chief executive officer of Pfizer Inc., was seen gesturing while speaking during a panel session at the World Economic Forum (WEF) held in Davos, Switzerland, on January 17, 2017, as captured by Simon Dawson for Bloomberg via Getty Images.
Activist investment firm Starboard Value has accused Pfizer of threatening legal action against the company’s former CEO, Ian Read, and former CFO, Frank D’Amelio. This alleged move was reportedly intended to pressure them into distancing themselves from Starboard’s developing campaign aimed at turning around the pharmaceutical giant.
Jeff Smith, the managing member of Starboard, expressed these concerns in a letter addressed to Pfizer’s board on Thursday. He claimed that the company or its advisors had also threatened to reclaim the former executives’ past compensation and cancel their unvested shares. Smith urged the board to assemble a special committee to investigate the situation, calling it “highly inappropriate, flagrantly unethical, and a significant breach of fiduciary obligations.”
According to a source familiar with the matter, the potential for legal repercussions was a key factor influencing Read and D’Amelio’s public support for Pfizer CEO Albert Bourla late Wednesday night.
Following the disclosure of the executive’s separation from Starboard’s efforts, Pfizer’s shares fell and started Thursday’s trading session approximately 2.5% lower.
Starboard’s Smith indicated that both former executives had expressed concerns about the company’s direction under Bourla and had shown willingness to assist Starboard in its turnaround initiative.
Neither Starboard nor Pfizer provided comments when requested. Smith also mentioned that he and Bourla are scheduled to meet in person next week, as previously reported. While the details of their discussion are not known, individuals familiar with Starboard’s strategy have suggested that Pfizer’s focus on a disciplined cost structure and mergers and acquisitions had weakened under Bourla’s leadership.
