Gilead Sciences DEFA14A 2012
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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Gilead Sciences, Inc.
Annual Meeting of Stockholders
May 10, 2012
Supplemental Information Regarding Proposals No. 3, 4 and 5
Your vote is important to us. At the 2012 annual meeting, in addition to the election of directors and the ratification of our auditors, our stockholders will vote on three important proposals. First, there is an advisory resolution to approve the compensation of our named executive officers or say-on-pay. This appears as Proposal No. 3 in our proxy materials. In addition, our stockholders will vote on two stockholder proposalsone requesting our Board to take steps to permit stockholder action by written consent and one requesting that our Board take steps to redeem Gileads poison pill plan unless the plan is subject to a stockholder vote. These proposals are Proposals No. 4 and 5 in our proxy materials, respectively.
We are writing to ask for your support at the Annual Meeting by voting in accordance with the recommendations of our Board of Directors on all proposals. For the reasons below, our Board of Directors unanimously recommend that you vote FOR Proposal No. 3. Our Board believes Proposals No. 4 and 5 are not in the best interest of our stockholders and thus unanimously recommends that you vote AGAINST these proposals.
Proposal 3Advisory Vote on Executive Compensation
The two leading proxy advisory firms reached opposing conclusions on our say-on-pay proposal. Glass Lewis & Co. recommends that stockholders vote for the proposal, stating that [w]e believe the board and the compensation committee have adopted a range of best market practices that minimize risky behavior among executives, and the compensation program, in aggregate, is well-designed to align pay with performance. Conversely, ISS Proxy Advisory Services recommends that shareholders vote against the proposal primarily because they calculate our Chief Executive Officers pay as being high in relation to our total shareholder return when compared to peers that they select. We disagree for two reasons. First, ISS values our Chief Executive Officers equity compensation based on the amount that is awarded, which represents only a future opportunity and not actual realized pay. At Gilead, our executives only realize value from equity-based compensation if our stock value increases after the equity is awarded. Second, ISSs peer group is generally compromised of companies with smaller market capitalization that are not our primary competitors for talent or products.
For the reasons set forth below and in our 2012 proxy statement, we believe Gileads executive compensation programs directly link pay and performance and urge you to vote FOR the advisory vote on executive compensation.
Gilead achieved strong operational performance in 2011. Because of our strong leadership, our 2011 operational performance met or exceeded our objectives. We continued to capitalize on opportunities to enhance our business and position us for further future growth, including:
Gilead achieved strong financial performance relative to its peer group in 2011
Gileads executive compensation program aligns pay with performance. The Compensation Committee believes that realizable pay rather than potential pay is the most relevant measure of pay-for-performance alignment as it represents the value actually earned by the executive.
Pay-for-Performance Alignment (1)(2)
Gileads Chosen Peer Group is Appropriate: We review our compensation peer group on an annual basis and make adjustments as necessary to ensure the comparator companies properly reflect the market in which we compete for executive talent. This annual review also ensures that we maintain a reasonable number of peer companies that are similar to us in terms of business strategy and other important measures, including industry, market capitalization, revenue and number of employees. We focus only on U.S.-headquartered companies and those that are either direct business or labor market competitors. In early 2011, we updated our compensation peer group to comprise 14 companies. Seven of these companies had higher revenue than Gilead and seven had lower revenue than Gilead. Subsequent to being included in our compensation peer group, three of these companies were acquired (Cephalon, Genzyme and King Pharmaceuticals). Therefore, although a current analysis of the financial characteristics of the available peer companies may suggest that our compensation peer group was weighted towards much larger companies, in actuality, the 2011 peer group used by our Compensation Committee during its compensation deliberations included an equal number of smaller and larger peers, with Gilead positioned at the 48th percentile of revenue.
*Cephalon, Genzyme and King Pharmaceuticals were later acquired and are not included in current proxy analyses by proxy advisory firms.
Due to the demonstrated direct link between our executives realized pay and the performance of our stock price, we respectfully request that you vote FOR Proposal No. 3.
Proposal 4Stockholder Proposal Requesting that the Board Take Steps to Permit Stockholder Action by Written Consent
The Board believes that holding meetings whereby all stockholders may discuss the proposed actions and vote their shares is the best way for stockholders to take action. Action by written consent would deny smaller stockholders the ability to determine whether to exercise their rights, such as by expressing their views, encouraging the Board to reconsider the matter and voting on the proposed action. Thus, this proposal could
adversely affect the conduct of stockholder business by resulting in certain stockholders taking action that otherwise would not have been taken if all of our stockholders were afforded the opportunity to discuss, debate and vote on the matter.
Further, our Board also believes adoption of this proposal is unnecessary because Gilead is committed to high standards of corporate governance and has already taken a number of steps to achieve greater transparency and accountability to stockholders. For example:
We respectfully request that you vote AGAINST Proposal No. 4.
Proposal 5Stockholder Proposal Requesting that the Board Take Steps to Redeem Gileads Poison Pill Unless the Plan is Subject to a Stockholder Vote
Our Board believes the Amended and Restated Rights Agreement, dated October 21, 1999 (the Plan) remains an important protection against takeover bids or threats that do not fairly value Gilead. The Plan is designed to encourage potential acquirers to negotiate directly with the Board and thereby foster takeover offers that are fair and in the best interests of all Gilead stockholders. The Board is in the best position to evaluate the adequacy of any potential offer, negotiate on behalf of all stockholders and seek a higher price if there is to be a sale of Gilead. The Plan allows the Board to evaluate offers, investigate alternatives and take the necessary steps to maximize stockholder value. Without the protection of the Plan, the Board would lose important bargaining power in negotiating the transaction with a potential acquirer or pursuing a potentially superior alternative.
The Plan also gives our Board of Directors a powerful tool to discourage takeover tactics that may harm stockholders, including creeping acquisitions of our companys stock in the open market, hostile tender offers made at less than a fair price, and partial and two-tiered tender offers that may discriminate against late-tendering stockholders. It is not intended to prevent, and will not prevent, any takeover proposal that our board of directors determines to be in the best interests of our company and our stockholders.
We respectfully request that you vote AGAINST Proposal No. 5.
Thank you for your ongoing support of Gilead Sciences, Inc. We appreciate your time and consideration on these matters and ask for your support of the Boards recommendations.