Activist investor Sarissa Capital Management LP is seeking a reduction in the compensation of Innoviva Inc.'s CEO and board.
The demand comes amid a proxy fight between the activist investor and the company, which Innoviva deemed "unnecessary and distracting."
The activist investor said that, for a company that manages royalties, the CEO is "grossly overpaid" considering the poor stock performance. It demanded that the compensation paid to the company's CEO be reduced below $500,000 per year, while board members' pay should be reduced below $200,000 per year.
Sarissa has also called on the chair of the compensation committee to resign for permitting "egregious compensation." The activist investor said that if the CEO refuses to reduce his pay, the board should immediately seek a more "reasonably priced" replacement.
Sarissa believes compensation should not be tied to financial metrics such as growth of royalties or operating income when the growth is driven by revenue. It also voiced concerns about the management's ability to be good stewards of future capital, taking into account current "excessive spending" and an expected increase in royalty revenues.
The activist investor has nominated a slate of three directors to the board of Innoviva, in an attempt to instill "much needed financial discipline and oversight" in the company. It has urged investors to vote in favor of its slate.