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Last year was a bruising one for the biotech industry. But a handful of biotech executives saw their compensation swell even as their companies tanked on Wall Street.
STAT reviewed federal filings from all 162 companies on the Nasdaq Biotech Index. The index as a whole fell by 19 percent last year, so it’s no surprise that CEOs as a group made 25.5 percent less in 2016 than they had taken home the year prior
But five outliers gave their executives huge raises even though their stocks actually fared far worse than the index average.
Such disparities can be maddening to investors. Executive pay is meant to be aligned with shareholder return.
That disconnect sometimes stems from poorly thought-out incentive plans that end up rewarding failure, said Aalap Shah, managing director at Pearl Meyer, an executive compensation consultancy in New York. Other times, bad years force boards to strike a delicate balance, paying CEOs enough to keep them around but not so much as to spark an investor revolt.
“This is something that is always very hard for shareholders to swallow, but oftentimes directors have to make the tough call to give compensation that looks misaligned,” Shah said. “They do that because they still believe the management team is the one that’s right for the company and its strategy.”