But just this morning, the shareholder proponent of a proxy proposal (called Trillium) filed so-called “free writing” solicitation material, ostensibly to answer the company’s suggestion that the proponent’s proposal isn’t worthy of the shareholders’ affirmative vote. [NOTE: This post is not intended as proxy soliciting material, of any stripe — and this blog is affiliated with no one on either side of this debate — this is merely business journalist commentary and legal analysis, of the issues involved. Merck’s position on the matter may be found here (at page 78).]
In essence, the shareholder proponent would like a report, on how best to “strengthen” Merck’s QA/RA chops — at the full board level. From Trillium’s SEC filing:
. . . .[Please] issue a report (at reasonable cost, in a reasonable time and excluding confidential information) evaluating the merits and feasibility of Merck (1) strengthening Board expertise in pharmaceutical manufacturing and product quality and safety, (2) adopting an independent board chair leadership structure, and (3) any other related governance improvements the Board wishes to consider. . . .
Aside from the language problems I see with the proposal (that arguably make it inappropriate, under existing SEC rules and releases and no action letters, as a subject for advisory vote by shareholders), I am convinced that the proponent’s premise is ill-founded. [And it matters quite a bit that at none of the companies Trillium mentions, is the Chairman and CEO also a lawyer — Merck’s is, and (based on my eight years of close observation) he sets a very appropriate regulatory focus, “at the top.”]
That is, I think even though some other multinational public pharmaceutical and life science companies have QA/RA experts at the board level — it doesn’t strike me that such a person is a requirement for effective corporate governance, at Merck — given its Chairman/CEO’s legal background.
True enough, a strong QA/RA function is an absolute requirement for any large pharmaceutical concern, but that is largely an operations and management function (i.e., well-below board level). And Merck’s is robust, in my independent estimation. Kenilworth may make various mistakes, from time to time, but this — RA/QA — is one of their long suits, in my view.
If Merck had seven 483s pending right now (it does not), or the FDA shutting down its facilities left and right (nope), then “tone at the top” would be a very important priority — even reaching into the board room. That may have been the old legacy Schering-Plough problem (i.e., pre-2010) — but that is clearly not the profile of New Merck.
So. . . were I a shareholder (I am not), I’d vote no on the Trillium proposal.
Now you know. Onward. [I welcome a reply, from Trillium, in comments. I will run it — as a new post. But note to Trillium: yours will also be “free-writing” material, so do comply with SEC rules. I will run all that you need to do so, should you choose to respond.]