Published On: Tue, Jul 15th, 2014

Activist Investor Benny Landa : Why I Care about Teva


Three weeks pass with no word.

Then, on June 18th, 2014, a surprise announcement: the 2014 Annual Shareholders Meeting would be convened on July 30th, 2014 – with virtually none of our concerns or promised actions included in the proxy statement.

How is this possible? We had acted in good faith, formally notifying Teva in January of our intent to place certain items on the agenda of the General Meeting – and agreed to withhold formal submission relying upon the Board’s undertaking to take the lead in instituting the reforms we demanded.I certainly felt that we had been misled.

Moreover, had the 2014 Annual Shareholders Meeting been announced even a few days later, to be convened in August or early September, as has been Teva’s practice in recent years (September 19, 2011, September 12, 2012, August 27, 2013), shareholders would have been able to place resolutions on the agenda. However, by advancing this year’s AGM, Teva’s Board was able to circumvent by just a few days Israel Companies Law Regulations, which, as of July 2, 2014, enable shareholders to place items on the agenda within seven days immediately following notification of the AGM. In contrast, Teva’s current Articles of Association permit shareholders to place items on the agenda only prior to the end of the two week period following Teva’s release of its previous year’s financials – i.e. six months before the Annual Shareholders Meeting! This blatant example of flawed governance has now been rendered unlawful under Israel law, but Teva’s Articles of Association seem to remain a bastion of governance abuse.

So what can we do? Having been deprived of our right to place items on the agenda of the Annual Shareholders Meeting, we could no longer submit resolutions or propose alternative director candidates. The only option available under law was to submit a “Position Paper” which the Company is required to distribute to shareholders.

On the outside chance that this Board may still choose good governance over a proxy fight, on June 26th I sent the following letter, offering the Board four days to consider postponing the Annual Shareholders Meeting, in order to be re-convened with a revised agenda addressing the governance and Board issues which we raised. If the Board were to reject this offer, we would submit our Position Paper, a copy of which was attached.

Dear Dr. Frost,

Re: Submitting a Position Paper regarding the upcoming AGM

I was surprised and disappointed to learn that Teva Pharmaceutical Industries Ltd. (Teva) published last Wednesday a notice convening an Annual Shareholders Meeting on July 30, 2014 (the General Meeting), without placing on the agenda thereof the important corporate governance matters I raised. Hence, I have no choice but to send this letter.

Reference is made to my letter of January 20, 2014 (attached hereto), to Mr. Elstein (Vice Chairman of Teva’s Board) and the other directors, expressing my intention to place specified items on the agenda of the general meeting, expressing my view that Teva’s Board of Directors is over-sized, lacks required global pharma experience and is plagued by conflicts of interest and governance failings, and proposing specific amendments to Teva’s Articles of Association. Notably, my proposed amendments preserved the Israel-centricity of Teva’s leadership (Articles 3, 33, 59, 75, and 84).

In response, on January 22, 2014, you notified Teva’s shareholders that Teva’s Board undertook a broader review of Teva’s governance including, among other things, the size and composition of the Board. You declared that Teva intends to reduce the size of the Board while also adding new Board members with global healthcare experience. You stated that the constructive input that the Board has received from Teva’s shareholders has guided Teva’s review and that you will keep shareholders informed as you implement changes. I assented to Teva’s request for additional time to promote this and other corporate governance matters, which are known to me to be of great importance to many significant institutional and private investors in Teva.

A month ago I sent you the email below, reminding you of the expectation of many institutional shareholders that Teva’s board will undergo a substantial upgrade at the coming general meeting. No reply was received and, instead, Teva issued the notice convening the General Meeting.

I attach hereto a draft Position Paper that, together with others, I intend to submit to Teva’s shareholders regarding the General Meeting (the Position Paper).

Notwithstanding, as I have repeatedly stated in the past, I believe it is far more desirable for Teva, its shareholders and its directors, that Teva’s Board initiates the required measures rather than having them imposed by shareholders. Therefore, I will not formally submit the Position Paper if, by Monday, June 30, 2014, 10:00 am (Israel time), Teva notifies its shareholders (or confirms to me in writing that it intends to do so within 24 hours of that deadline) that the General Meeting will be postponed (until further notice), to be  re-convened with a revised agenda addressing the matters referred to in my letter of January 20, 2014 and in the Position Paper (regarding board composition, amendment of Articles of Association and the other specified corporate governance matters).

I look forward to hearing from you and finally working jointly towards Teva’s return to responsible governance, professional management and realization of its true market potential.


It’s me again

Teva’s board passed on our offer and, with great regret, after five months of hope, I had to dust off my activist shingle and get back into the mire. I first updated my investor network, expressing my views. Here are some excerpts:

Yes, it’s me again. Five months ago, after Phil Frost’s January 22ndletter to shareholders, in which he undertook to revamp the board and implement changes in corporate governance, I wrote to you that you probably won’t be hearing from me again. I genuinely believed that Frost was sincere and that Teva’s board would honor these commitments. I was mistaken.

Earlier this month Teva announced that the Board would be reduced from 15 to 13, that it would add only one pharma-experienced director, and that Phil Frost would be stepping down as Chairman at the end of the year. That’s it. Full stop. No mention of any corporate governance changes, no mention of dismantling of the Board’s interlocking directorships (Frost-Belldegrun-Lerner) with their intrinsic conflicts of interest, and, most importantly, no significant change to the board’s composition. There continues to be a dearth of pharma-savvy directors running this company. In fact, except for three directors who will not stand for re-election, Teva’s board will have only one new face. So nothing has really changed.

Phil Frost has stated that he intends to resign the chairmanship at the end of this year, though he continues as a director. And even though the Board claims to have hired a reputable search firm to identify credible succession candidates, I was informed yesterday by Moshe Many, Amir Elstein’s predecessor as Vice Chairman, that the Board has already decided that it will name Amir Elstein as the next Chairman! There appears to be no limit to this board’s disregard for proper corporate governance and its disdain for shareholder views or interests.

The good news is that Erez Vigodman appears to be doing a great job of gaining the trust and confidence of Teva’s management and employees, still recovering from the trauma of Jeremy Levin’s abrupt removal. I continue to believe that Vigodman was the right choice for the Company at this time and that he has the makings of an outstanding CEO for Teva. Trouble is, without pharma experience of his own, he desperately needs the guidance and mentoring of a pharma-seasoned board. Furthermore, considering the huge challenges which Teva will soon be facing – from generic Copaxone rivals to global facilities consolidations – now more than ever, this company needs a high caliber pharma-knowledgeable board.

Last week I sent the attached letter to Teva’s Board. The letter – and the Position Paper – speak for themselves. The main purpose is to send a clear message to Teva’s Board: the Company’s shareholders will not … sanction the Board’s disregard for shareholder concerns. We insist on proper corporate governance – and expect the Board composition to be upgraded.  Teva should name a successor Chairman of international repute, befitting the position. From numerous conversations which I have had with Teva shareholders, both individual and institutional, I believe that our position will get broad shareholder support.

I understand the compliance issues faced by institutional investors, who cannot join “activist” actions, so our Position Paper will officially represent only two of Teva’s shareholder constituencies: Teva’s founding family (represented by Ruth Cheshin) and individual investors (represented by myself). Though we have strong backing of the third constituency, institutional investors, their support will be expressed only when exercising their proxies.

The reason I am writing to you now is firstly to update you on the situation, and secondly, to seek your support when it comes time to vote your proxy. Were our efforts to fail, I fear that 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…

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About the Author

- Please read more about Benny Landa here :

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