Peptech stands by directors' remuneration

The Australian Shareholders Association (ASA) has clashed with Sydney biotech company Peptech over the company's remuneration of non-executive board members.

In January, Peptech's shareholders approved a proposal to grant each of the company's non-executive board members 125,000 share options in remuneration.

But the ASA said not all the shareholders were happy with the decision, and the association plans to take up the issue at Peptech's board meeting tomorrow (February 22).

In a statement, ASA spokesman Stephen Matthews said Peptech had "rushed" the decision through by holding its general meeting at its "inaccessible" North Ryde office on January 7, "while analysts were taking a well-earned break."

"Why couldn't it wait for six weeks until the AGM in February when shareholders, back from holidays, could have their say?" Matthews said.

He said granting of such options to non-executive directors was "bad corporate governance".

"It is inappropriate for non-executive directors to be issued with options because it has the potential to create a conflict of interest when they are then called upon to set targets and hurdles for executive directors," he said.

But Peptech MD Stephen Kwik said he was surprised that the ASA would attend the board meeting, over a month after the initial decision was made, and denied that there could be any conflict of interest.

"They [the ASA] are barking entirely up the wrong the tree," he said, adding that 83 per cent of shareholders voted for the remuneration.

Prof Graham Mitchell, who has been on Peptech's non-executive board for over four years, is stepping down, and his place will be taken by John Leaver.

"If Leaver is appointed as a non-executive director in the general meeting, he will have to seek shareholder approval for his 125,000 share options remuneration," Kwik said. "If they [non-executive directors] are able to add value to the shareholders than they should be rewarded accordingly."

Mitchell told Australian Biotechnology News that he had stood down from the Peptech board because he strongly believed in corporate turnover.

Appropriate remuneration of non-executive board members was the rule in the US, he said. "High-risk entrepreneurial companies have a reward structure that is based on the company succeeding - not the individual's performance," he said. "This is how it should be.

"How else can you [provide incentive to] non-executive directors? It's aligning their interests with shareholders'."

Kwik said that in addition to granting share options, the company had increased the number of directors from four to seven so that the total directors' fees package had doubled to $500,000.

"We have increased the remuneration because we want to strengthen the board of Peptech," he said. "The company is capitalised at $800 million and the board should be remunerated accordingly."

Meanwhile, Peptech's shares increased in value by almost eight per cent after the company announced that the US Patent Office had granted a patent for the company's tumour necrosis factor antibodies, which has possible applications in rheumatoid arthritis and psoriasis.