Entropy, a consultant firm for investment institutions, is opposing most of the proposals on the agenda of the annual shareholders' meeting of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), sources inform "Globes." Entropy recommends rejection of five of the eight motions Teva is bringing up for a vote, and has expressed its opposition to them. Entropy is therefore providing support to printing entrepreneur and private Teva investor Benny Landa, after US consultant firm Glass Lewis also supported his position. ISS, another US firm advising investment institutions, recommended its client to support all the proposals on the agenda.

It now remains to see whether the Teva meeting will take place on schedule nine days from now. Sometimes, when companies realize that they have not obtained the required majority for approval of their proposals, they elect to postpone the meeting. At the same time, Entropy is advising only 5% of the institutions that have invested in Teva, while the majority of Teva's shareholders, US institutions, receive recommendations from ISS.

At the meeting, the shareholders will be asked to reelect two directors to another term, Dan Propper and Ory Slonim; reelect external director Joseph Nitzani; add Jean-Michel Halfon to the board as an external director; approve the targets for the bonus to CEO Erez Vigodman and allot him an annual capital remuneration; and reappoint PricewaterhouseCoopers (PwC) as the company's accountants.

Unanimous approval for Halfon

Actually, the consultant firms all agree about only two of the proposals: support for the appointment of Halfon, who has vast experience in pharmaceuticals, as director, and the appointment of PwC.

Entropy opposes the reappointment of Propper and Slonim, even though it appreciates their experience and abilities, due to Teva's staggered mechanism for appointing directors. This refers to the fact that Teva's non-external directors are divided into three groups, each of which is appointed for three years. "The purpose of this mechanism is to prevent a potential hostile functional takeover," Entropy's recommendation states. "Adopting this mechanism makes the company less attractive to an investor seeking to take it over, and therefore is a factor that reduces the company's value, given the absence of a potential investor's ability to rectify situations of management failure, for example by replacing the board of directors."

Entropy also writes, "We believe that appointing a director for a period of over one year harms the right of a shareholder to choose with great frequency the directors deserving of a term."

Therefore, in accordance with Entropy's policy of opposing a staggered board of directors, it recommends opposing the appointments of Slonim and Propper. On the other hand, Entropy supports the appointment of Nitzani as an external director, in line with ISS's recommendation, and in contrast to Glass Lewis, which recommended opposing his reelection. Entropy also recommends opposing approval of personal liability insurance coverage for the directors, as did Glass Lewis.

Published by Globes [online], Israel business news - www.globes-online.com - on July 21, 2014

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