Perrigo Gets Hard-Fought Nod to Omit Stock Option Proposals

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Che Odom

March 31 — Perrigo Co., a Dublin-based provider of over-the-counter pharmaceuticals, has gained the approval of the Securities and Exchange Commission staff to exclude from its proxy a pair of shareholder proposals addressing stock options, but only after asking for reconsideration.

According to a review of documents posted on the agency's website March 30, Perrigo shareholders won't get to vote on resolutions calling on the company not to issue any stock options for less than $250 per share and to void any options issued to management in 2014 and 2015 because “management should not be rewarded for underperformance.”

Companies often ask the SEC's Division of Corporation Finance to review shareholder proposals and issue a so-called “no-action letter” confirming that the staff won't recommend enforcement action if a particular proposal is omitted from the companies' proxy materials.

Perrigo's experience may remind companies to fight for no-action relief if they believe their arguments have merit.

Knock Three Times

The division said in a March 14 letter that it couldn't concur with the company's argument that the proposals, submitted by shareholder Dennis Breuel, were excludable because he did not meet filing deadlines.

Perrigo asked for reconsideration the next day, adding alternative bases for exclusions.

On one proposal, the company argued that placing a per-share value limit on stock options infringed on ordinary business operations, and the division agreed the resolution could be omitted for that reason.

On the other, Perrigo argued that implementation would require it to breach existing contracts, but the division didn't concur. Perrigo again asked for reconsideration, reiterating the same argument. On the second try, the division agreed.

Attempts to reach Perrigo's general counsel and its outside counsel, as well as division representatives, weren't immediately successful March 31.

Mylan Bid

In his proposals, Breuel referenced Perrigo's successful defense last year of a hostile takeover bid by Mylan NV. Mylan's offer valued Perrigo at $250 per share, he said in his Feb. 18 proposal.

“The company responded that the offer was undervalued,” Breuel observed. “It would be inappropriate to sell shares to the management at a price that was undervalued.”

After successfully fending off Mylan, Perrigo Chief Executive Officer Joseph Papa received additional restricted stock in December worth $1.5 million at the time, and a $500,000 cash bonus, the company disclosed in a March 4 preliminary proxy statement.

According to the statement, the $2 million pay bump was awarded for Papa's “key contributions related to Mylan's hostile takeover attempt” between April 2015 and November 2015, when Perrigo shareholders rejected the deal at the urging of the drugmaker's management.

In addition, Chief Financial Officer Judy Brown and General Counsel Todd Kingma each received stock awards valued at $375,000 and cash bonuses for equal amounts.

To contact the reporter on this story: Che Odom in Washington at

To contact the editor responsible for this story: Yin Wilczek at