Saturday, April 18, 2009

Pfizer - A Fiefdom for Corporate Managers?

In theory corporate managers manage the corporations they work for, for the benefit of the shareholders. The recent meltdown in our financial institutions has exposed managers who have bankrupted the corporations that they work for. In bankrupting these companies the self-serving managers have paid themselves lavishly while "annihilating" the investment of the shareholders in the company.

Pfizer is a drug company, not a financial institution; but the management of Pfizer appears to be exhibiting the signs that management is operating the company as a fiefdom for management's benefit and not fulfilling their fiduciary duty to work on behalf of the shareholders.

In 1999 Pfizer stock briefly touched $50 a share. Over the past ten years the stock has continued an inexorably decline to $14.16. The dividend has also been severely cut from $1.28 to $.64. Value Line, an investment newsletter recently downgraded the financial health of Pfizer from A++ to A+. Despite this "damage" to the company, the Pfizer Board of Directors (Notice of Annual Meeting of Shareholders) awarded Mr. Kindler $13.1 Million. The proxy statements cites "In view of the accomplishments noted above and the fact that he met all of his targeted goals and exceeded most of them, the Committee and the Board of directors believe that Mr. Kindler has successfully steered the Company during a year of opportunity and challenge, particularly given various Company-specific factors and macroeconomic factors, and that Mr. Kindler was appropriately compensated for 2008 considering overall Pfizer performance, his personal contributions and peer-group competitiveness. " The proxy statement lamely notes that Mr. Kindler's compensation was reduced by 5%.

Value Line (April 17, 2009), in reporting on Pfizer writes: "Pfizer's bid for Wyeth follows two earlier deals, both of which caused integration challenges, ultimately reducing R&D and productivity. Neither the 2000 takeover of Warner-Lambert nor the 2003 combination with Pharmacia succeeded in setting up the company for sustained growth once Lipitor's patent expires in 2011." Value Line also noted that the proposed Wyeth acquisition will result in Pfizer inheriting Wyeth's legal woes and that the acquisition may not solve Pfizer's problems. The financial community apparently does not view this acquisition positively since Pfizer's stock price has continued to decline in value.

How the management of Pfizer can continue to proclaim "progress" in the face of an ongoing continued decline in stock price, a cut in the dividend, and financial downgrades is beyond me. Clearly it is time for a change in the management structure. The annual meeting for Pfizer will be held on April 23, 2009. If you own shares in Pfizer, I would hope that you would vote against management.

PS: We own shares in Pfizer.

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