Establish deferral period for senior executive bonuses

Resolution Text

RESOLVED that shareholders of Gilead Sciences Inc. (“Gilead”) urge the Compensation Committee (the “Committee”) of the board to change any annual cash incentive program (“Bonus Program”) to provide that an award (a “Bonus”) to a senior executive that is based on one or more financial measurements (a “Financial Metric”) whose performance measurement period (“PMP”) is one year or shorter shall not be paid in full for a period (the “Deferral Period”) following the award, including developing a methodology for determining the length of the Deferral Period and adjusting the remainder of the Bonus over the Deferral Period.

The methodology described above should allow accurate assessment of risks taken during the PMP that could have affected performance on the Financial Metric(s) and allow the Committee to exercise negative discretion.

The changes should be implemented in a way that does not violate any existing contractual obligation or the terms of any compensation or benefit plan currently in effect.

Supporting Statement: As long-term shareholders, we support compensation policies that align senior executives’ incentives with the company’s long-term success. We are concerned that short-term incentive plans can encourage senior executives to take on excessive risk.

In our view, reliance on anticompetitive practices can create significant risks for pharmaceutical firms. Gilead is facing a class action lawsuit by purchasers of its HIV drugs alleging that Gilead and several other drug makers violated antitrust law by engaging in an array of practices to thwart competition, including horizonal agreements.1 The House Committee on Oversight and Government Reform held a hearing in May 2019 into Gilead’s pricing of HIV combination therapy Truvada for PrEP, touching on the dispute between Gilead and the Centers for Disease Control and Prevention over the latter’s patent for PrEP.2

To foster a longer-term orientation, this proposal asks that the Committee develop a methodology for withholding some portion of Bonuses to allow adjustment of the unpaid portion during the Deferral Period. The Committee would have discretion to set the terms and mechanics of this process.

Bonus deferral is widely used in the banking industry, where overly risky behavior was widely viewed as contributing to the financial crisis. In 2009, the Financial Stability Board, which coordinates national financial authorities in developing strong financial sector policies, adopted Principles for Sound Compensation Practices and implementation standards for those principles, including bonus deferral. Deferral is “particularly important” because it allows “late-arriving information about risk-taking and outcomes” to alter payouts and reduces the need to claw back compensation already paid out, which may “fac[e] legal barriers,” in the event of misconduct. Banking supervisors in 16 jurisdictions, including the US, have requirements or expectations regarding bonus deferral. (https://www.fsb.org/wp-content/uploads/P170619-1.pdf)

We urge shareholders to vote FOR this proposal.

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1 See https://aboutlawsuits-wpengine.netdna-ssl.com/wp-content/uploads/2019-5-14-gilead-class-action.pdf
2 https://www.fiercepharma.com/pharma/gilead-s-o-day-takes-congressional-hot-seat-to-defend-truvada

Lead Filer

Corey Klemmer
Domini Impact Investments LLC