Sanofi faces AGM row over cost of firing and hiring CEOs

By Andrew Callus

PARIS (Reuters) - Drugs group Sanofi (SASY.PA), which sacked its chief executive last year and appointed a new one in February, has appealed for shareholder loyalty as it seeks to head off a potential rebellion over millions of euros in payments to both men.

Investor advisory group ISS has recommended a vote against two resolutions that would approve those payments at the French company's annual general meeting (AGM) on Monday.

In a letter to shareholders on its website, the company said: "If Sanofi is taking the initiative today of contacting you directly, it is because these recommendations do not reflect a simple difference of opinion; they reflect a real error in analysis by ISS."

One of the ISS objections relates to approval of a joining bonus, a giant pension pot and other terms for new CEO Olivier Brandicourt. The second covers non-compete and confidentiality severance payments for his predecessor, Chris Viehbacher.

The former CEO won a total 4.44 million euros ($4.95 million). In exchange, he agreed not to work for a competitor until June, not to recruit Sanofi employees for 18 months and to adhere to a two-year confidentiality agreement.

Brandicourt, meanwhile, could earn up to 4.2 million euros a year and pocket an extra 4 million euros as a one-off golden hello. He was also awarded a pension pot equivalent to 10 years' service.

"SHAREHOLDER-UNFRIENDLY"

Another advisory group, Proxinvest, which backs ISS's position, has estimated the value of the pension pot at 9 million euros and ISS said the pension award "goes against market standards in France".

ISS also objected to the way the company was "bundling" a vote on the pension with other parts of Brandicourt's employment terms into one resolution on an auditors' special report, describing the action as "poor and shareholder-unfriendly practice".

Sanofi's letter said that Brandicourt's recruitment conditions "need to be considered as a whole". He was recruited from Bayer Healthcare, part of German group Bayer (BAYGn.DE), and elements of the deal are to compensate him for a loss of benefits there.

His package has already drawn criticism from France's Socialist government, which is sensitive about executive pay in a period of high unemployment. Agriculture Minister Stephane Le Foll called it "incomprehensible".

Defending its payment to Viehbacher, Sanofi argued that the payoff had avoided a protracted legal dispute and was substantially less than the outgoing boss had sought. It also said it had obtained "valuable undertakings" from him.

ISS's hackles have also been raised by the fact that the Viehbacher resolution -- unlike the vote on Brandicourt's remuneration -- is merely advisory and the vote non-binding.

The investor group acknowledged Sanofi's arguments for the settlement itself but said there should still be a proper vote because the terms were not those in Viehbacher's contract.

(Editing by David Goodman)