Mr. Schiller’s $9 Million Worth of Reasons to Work Cheaply

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Valeant Pharmaceuticals is the type of company that tends to make even the simplest things complex.

The contract of Howard Schiller, its new chief executive officer, is proof of this tendency.

On Jan. 6 Valeant’s board of directors gave Schiller the role of interim CEO; the company previously had an hoc, three-man “office of the chief executive”created on Dec. 28 in the wake of the disclosure that founder and then CEO J. Michael Pearson had taken a medical leave of absence of indefinite duration.

Notwithstanding the fact that Valeant has become the most closely followed company in the capital markets — attributable in part to the Southern Investigative Reporting Foundation’s revelations of its hidden ownership of Philidor — it was reasonable to have expected a filing several days after Schiller’s appointment that disclosed relevant compensation package details.

But that announcement came only on Feb. 1, three weeks after Schiller assumed control.

Schiller’s July 17 separation agreement sheds some light on why he ran a besieged company for over three weeks without an employment agreement in force. Recall that the then CFO resigned in April (after the high-profile Allergen acquisition bid collapsed) to pursue other interests.

The July agreement paid Schiller $2,500 per month for consulting and allowed 100,000 “performance restricted stock units” to vest on Jan. 31, 2016, giving him over $9 million worth of reasons to work (temporarily) for less than the salary of an assistant manager at a fast food restaurant. Each unit converts into one freely tradable share.

Why Valeant would not state that Schiller’s employment agreement would be disclosed after his 100,000 units vested is unclear. An email seeking comment from the company’s public relations adviser, Sard Verbinnen’s Renee Soto, was not responded to.

From a narrow point of view, Schiller’s new contract appears fairly standard; it paid him $400,000 per month for a two-month term ending on March 6. What happens then, however, is unclear. It certainly opens up a Russian nesting doll of questions: Is Michael Pearson seeking to return? If so, will there be disclosure about the root causes of his multi-month absence? If he can’t or won’t return, what criteria is the board of directors using to evaluate Schiller over a 60-day period?

Despite Schiller’s having $9 million in salable stock and a handsome salary on top of that, the money is unlikely to be much comfort for Schiller, given the looming date of his Feb. 4 for his appearance before the House Government Oversight and Reform Committee to answer questions about Valeant’s drug pricing strategy A Feb. 2 memorandum from the committee’s Democrats suggests that Schiller’s welcome will not be a warm one. Containing some unflattering excerpts culled from the more than 75,000 documents Valeant produced in discovery, it shows, among other things, that the company pursued transactions simply for the ability to raise prices. The memorandum did not try to hide the Democrats’ contempt for Pearson, mentioning him eight times in the seven-page document.

Corrections: The initial version of this story misstated the value of Howard Schiller’s restricted stock unit grant and inaccurately connected him to Valeant’s brief-lived office of the chief executive. The story has been corrected and updated. 

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