Activist Investor Benny Landa : Why I Care about Teva


So I have become an activist because I fear that unless something is done, Teva’s board will become even further entrenched, with dismal chances for change. More old-boys-club appointments, more conflicts of interest and disdain for normative governance. In other words, a company unlikely to succeed.

So, on November 3rd, 2013, four days after the Board fired Jeremy Levin, I put together a list of twenty of Teva’s leading investors (including its fourteen top institutional investors), writing to each of them individually to both express my views and extend a call to action. Here are a few excerpts from those letters:

    1. Teva has fired three CEO’s in a period of six years.
    2. There is a dearth of big pharma experience amongst its directors (sixteen of them – none with global pharma backgrounds).
    3. The Board has serious conflicts of interest and governance issues.
The board capriciously fired the CEO, without adequate preparation, without first searching for an alternative and, frankly, without responsibly weighing the consequences. We have no interest in boardroom intrigues or, in the words of Teva’s Chairman, “slight differences over nuances” which were blamed for the Board’s flawed action.
Though I have the highest regard for each of Teva’s directors as individuals,  they must be bolstered by directors with big-pharma experience.
Teva has seen a 40% decline in  value since Philip Frost’s appointment in March of 2010. That’s a decline of some $23 billion in shareholder value, $4 billion of which is directly attributable to last week’s decision.
I am most eager to discuss this with you in person and, if you are willing, to cooperate in taking action.

I was amazed by the positive responses from Teva’s institutional investors, including some of the largest. Though some emphasized that their policies preclude them from investor activism, they explained that this does not prevent them from supporting activist-led resolutions – or rejecting Board motions – if they feel it is in the interests of shareholders. Some expressed their own frustrations with Teva’s corporate governance shortcomings and applauded our initiative.

Now with significant shareholder backing, I again approached Teva’s board and met with Amir Elstein. On December 23rd, 2013 I sent my investor network an update. Excerpts:

As promised, I would like to update you regarding our Teva action.

The past couple of weeks have been quite eventful. Teva’s Board designated Amir Elstein (newly-named to become Vice Chairman in January) as its sole representative in dealing with us. I have now had two lengthy meetings with Mr. Elstein and am pleased to report that we have come to a meeting of the minds as to what actions must be taken, starting with Teva’s Board of Directors.

Mr. Elstein shares our view that it is far preferable that those actions be initiated by Teva’s own Board rather than be imposed by shareholders. Accordingly, from the conclusion of our meeting of yesterday, my understanding from Mr. Elstein is that we should expect, in January, to see Teva‘s board assume the following undertakings:

      1. To reduce the size of Teva’s board to about 12 directors (from 16 today).
      2. To infuse the Board with a significant number of global pharma-experienced directors.
      3. To make significant Board leadership changes (of which Elstein’s appointment as Vice Chairman is only the first).
      4. To amend Teva’s Articles of Association to ameliorate  director entrenchment issues (such as the inability to remove an underperforming director and the 85% supermajority required to amend important provisions of the Articles), while preserving the Israel-centricity of Teva’s leadership.
      5. These actions are to be brought before Teva shareholders at its 2014 Annual Meeting.

Of course Mr. Elstein was not empowered to commit on behalf of the Teva Board, but I was struck by his sincerity and determination – and believe that he has the full backing of the Board.

Now we must wait and see. If indeed Teva’s Board delivers on the above, that will be a giant step in the right direction. I don’t know if this board is able to attract a world class CEO to lead Teva, but with higher standards of corporate governance and a pharma-seasoned board of directors, at least he may stand a better chance than his predecessor!

 Two weeks later, on January 5th, 2014, I distributed a follow-on letter to shareholders. Some excerpts:

As you are undoubtedly aware, recent press reports indicate that Erez Vigodman will be named CEO of Teva. I have been asked by a number of Teva shareholders to comment on this crucial appointment and am happy to share my thoughts (please don’t hesitate to call if you want to follow up).

You may find this anecdote from my first encounter with Erez Vigodman interesting. In early 2005, then-Finance Minister Benjamin Netanyahu and then-Industry Minister Ehud Olmert invited four of us (Israeli industrialists), to a private “strategic roadmap” meeting of ten. The object was for us to share our thoughts on the future of the Israeli economy with the two Ministers and four Directors-General (including of the Prime Minister’s Office). The four industrialists included Eli Hurwitz (then Chairman of Teva), Erez Vigodman (then CEO of the Strauss Group), myself and one other. Only Vigodman and I presented – he on “How Israel Should Develop its Economic Strategy – Lessons Learned from Comparable Countries” and I on “The Israel Economy in the Era of Globalization – and What Israel Must Do to Avoid Becoming a Third World Economy”.  I will spare you further details but to say that it was a fascinating summit from which I believe all participants left inspired. My impressions of Erez Vigodman from that meeting were positive: analytical, strategic, caring.

Fast-forward nine years to my meeting with Amir Elstein of two weeks ago. Towards the end of our meeting we discussed the upcoming CEO appointment and I expressed the view that Teva would be best served by a CEO with global pharma experience – but questioned this board’s ability to attract a top-tier candidate. Elstein asked that I keep an open mind and suggested that I meet with Vigodman before coming to a conclusion, to which I agreed. Erez and I met five days later.

I hadn’t met with Vigodman since our 2005 encounter. For most of the four hours that we spent together I just asked questions and listened. Erez took me through his history, first as CEO of the Strauss Group (Israel’s largest food and beverage company) and then as CEO of Makhteshim Agan Group (market leader in branded off-patent crop protection solutions). Erez took me through the historical challenges he faced at each company, as well as his actions, the strategies he adopted and the outcome. And of course we discussed Teva at great length. We touched on every issue I could think of, from historical Teva Board issues to the strategy going forward, from values and leadership to the skepticism he will face, coming to the job from outside the industry.

My conclusion? As critical as I am of Teva’s Board, I think this time they got it right.

I have, over the years, not only hired and fired my share of CEO’s, but I have also worked closely with some of the best and worst (for ten years after HP acquired my company, Indigo, I served as Strategic Advisor to HP’s successive CEO’s Carly Fiorina, Mark Hurd and Leo Apotheker, through the rise and fall of each, and have learned to recognize some of the signs…). I believe that Erez Vigodman is made of the right stuff to succeed. He is a strategic thinker with excellent managerial skills. My sense is that he has the courage to make tough decisions and the decency to be respected by those worst affected. He is a straight shooter whom the street will learn to trust.

Certainly, Vigodman does not bring pharma experience to the job, which is a pity. However, having led (and turned around) Makhteshim Agan, which develops products that fight diseases in plants (but alas, not humans), he has the next-best experience. One strong impression I got from my marathon session with Vigodman is that he knows what he doesn’t know – and will be eager to learn from his management team and from his customers.

Not wanting to rely solely on my own impressions, I did some subsequent digging about Erez Vigodman, including a call to Ofra Strauss, Chairperson of the Strauss Group, whom I know personally and trust completely. I was blown away by her unreserved passionate endorsement of Erez, not only as a great manager and executive, but also his honesty, integrity and courage as an individual. That was my impression too and I was gratified to get such an extraordinarily resounding affirmation.

In summary, I believe that Erez Vigodman has the right combination of qualities and experience to lead Teva back to the Promised Land! As CEO of Teva, he has a lot to learn but needs to be given a fair chance to turn the Company around.

And that’s where we come in, again.

Teva cannot afford to have another failed CEO. We, Teva shareholders, have too much at stake to allow that to happen. It is incumbent upon us to ensure that this CEO has a board that will stand behind him and will not interfere in his day-to-day management of the Company. This pharma-inexperienced CEO needs a board that can offer him pharma-seasoned advice and counsel. A board that is independent and free of conflicts of interest. In other words,  a very different board from today’s.

The ball is now in the Teva Board’s court. If Amir Elstein can deliver as assured, and the Board this month announces its intent to live up to our understandings, that will be good news for all. If not, we will, with regret, have to go back to Plan A.

I again thank you for your continuing support.


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