Influential proxy adviser Glass Lewis has urged investors to vote against reappointing the chief executive and chairman of Illumina, the world’s largest gene sequencing company, saying the pair failed to take responsibility for the “value-crimping” acquisition of cancer-screening group Grail. .
The recommendation that shareholders withdraw their support for Chief Executive Francis D’Souza and Chair John Thompson is a boost for activist investor Carl Icahn, who has launched a proxy war against Illumina’s board over what he describes as its “reckless” purchase of Grail.
Glass Lewis said shareholders should instead support the two directors proposed by Icahn, arguing that Illumina’s board was “reluctantly unwilling” to accept any clear responsibility for the “costly, distracting and value-crimping” decision to close the Grail transaction against the wishes of the EU. ” Appear. and US antitrust regulators.
The proxy advisor said its recommendation reflected its unease over Illumina’s operating performance, value creation and overall corporate governance.
In a report, Glass Lewis gave Illumina an “F” grade for its executive pay program despite its share price slump following its decision to nearly double D’Souza’s total pay in 2022.
The proxy battle follows a tumultuous 18 months for Illumina, whose market capitalization has fallen from $75bn in August 2021 after it acquired Grail for just over $30bn this month.
Illumina is appealing orders by the EU and US Federal Trade Commission to divest Grail and faces a possible fine from Brussels of 10 percent of its annual revenue for closing the deal without regulatory approval.
Shares of Illumina rose 7 percent on Wednesday following the news.
Glass Lewis said his recommendation to the chief executive and chair was based on his concerns about the board’s decision to take the rare step of closing the Grail deal in the face of objections from regulators.
The proxy firm said Icahn failed to substantiate certain claims he made about governance matters, including that Illumina’s Grail transaction was “rife with related-party-style conflicts of interest.” But he said the board’s defense of its decision to appoint Thompson as company chairman was “weak,” given his relationship with D’Souza before he joined Illumina.
Thompson was Symantec’s chief executive at the time of its February 2006 acquisition of IMlogic, a company founded and led by D’Souza. The two men worked together at Symantec for several years after the deal, which provided D’Souza with a “significant windfall,” according to the report.
Glass Lewis said the “optics” surrounding the historical relationship between D’Souza and Thompson should have contributed to the selection of a comparatively qualified alternative candidate unfettered by personal or business connections to Illumina’s sitting CEO.
Illumina said it disagreed with Glass Lewis’ recommendation: “The election of Carl Icahn’s nominees would be disruptive to our core business. We recommend that shareholders vote in favor of all of Illumina’s highly qualified nominees.”
