PROVIDENCE— State Treasurer Seth Magaziner and national coalition Investors for Opioid Transparency have won an U.S. Securities and Exchange Commission ruling that AmerisourceBergen Drug Corp. shareholders may propose during an annual meeting that the pharmaceutical distributor disclose “clawed-back” compensation from senior executives due to misconduct contributing to the national opioid crisis, Magaziner announced Monday.
Shareholders are proposing the clawback disclosure as well as disclosure of information on AmerisourceBergen’s response to the U.S opioid crisis. The proposals were filed by members of Investors for Opioid Accountability, of which Rhode Island is a member by virtue of its investments, primarily in pension funds, according to Magaziner’s office. United Auto Workers, also an IOA member, has been leading the effort, according to Magaziner’s office.
IOA is a coalition of 40 treasurers and comptrollers, asset managers, faith-based, public and labor finds with over $1.4 trillion in assets. The coalition is engaging with opioid distributors and manufacturers on issues including board oversight of business risks related to opioids.
AmerisourceBergen, the nation’s third largest drug distributor, paid $16 million in March 2017 to settle a lawsuit brought by West Virginia for allegedly contributing to the overdose crisis in that state. It is one of three wholesale drug distributors listed as defendants in a public nuisance lawsuit filed Jan. 22 by fourteen Rhode Island communities.
Officers of AmerisourceBergen appealed to the SEC to avoid placing the proposals in its proxy materials distributed to shareholders for the company’s 2018 annual shareholder’s meeting.
ABC (AmerisourceBergen) argues that it is entitled to exclude the Proposal because it is excessively vague and indefinite (Rule 14a-8(i)(3)), the Proposal deals with ABC’s ordinary business operations (Rule 14a-8(i)(7)), and that there is not sufficient connection between the nature of the proposal and the company’s business (Rule l 4a-8(i)(7) B).
In response, the SEC Office of the Chief Counsel of the Division of Corporation Finance disagreed with all the company’s assertions.
“We are unable to conclude that the Proposal is so inherently vague or indefinite that neither shareholders voting on the Proposal, nor the Company in implementing the Proposal, would be able to determine with any reasonable certainty exactly what actions or measures the Proposal requires,” wrote SEC Attorney-Adviser William Mastrianna.
“Accordingly, we do not believe that the Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(3). We are unable to concur in your view that the Company may exclude the Proposal under rule 14a-8(i)(7).”
“We note that the Proposal focuses on senior executive compensation. Accordingly, we do not believe that the Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(7),” Mastrianna wrote.
With the SEC’s denial of AmerisourceBergen’s appeals, shareholders will be allowed consider the proposals at the shareholder’s meeting later this year, Magaziner’s office reported.
“By denying AmerisourceBergen’s attempt to stonewall concerned investors, the SEC has recognized that the opioid epidemic is a significant policy issue with a real impact on investors,” said Magaziner.
Rhode Island has the fifth highest overdose death rate in the nation, with 28.2 percent (the number of deaths per 100,000 total population), at 310 deaths.
“Opioid-related deaths in Rhode Island are a public health epidemic. The State and federal government must work together with the nonprofit and the private sectors to curb opioid misuse and abuse,” said Treasurer Magaziner. “The pharmaceutical industry bears tremendous responsibility and must act to address this crisis.”
Rob Borkowski is a PBN staff writer. Email him at Borkowski@PBN.com.
