Bonuses for 5 Purdue Pharma top execs OK’d

Judge approves up to $7M for 2021; Tong criticizes compensation

STAMFORD — OxyContin maker Purdue Pharma gained a bankruptcy judge’s approval Monday to pay up to approximately $7 million in executive bonuses for 2021, but Connecticut Attorney General William Tong criticized the latest round of multimilliondollar compensation at the Stamford-based company.

The performance-based payments in the “Key Employee Incentive Plan” would go to Purdue CEO and President Craig Landau and four other top executives. Purdue officials have asserted that the bonuses are necessary to combat high turnover and recognize employees for demanding workloads. Their arguments persuaded Judge Robert Drain, who separately approved Sept. 1 a settlement plan that would resolve several thousand lawsuits consolidated in the company’s bankruptcy.

“Ultimately, what the KEIP enables is the opportunity to bring aggregate compensation for these five individuals up to the median (level) in their industry,” Drain said during his ruling, in a remotely held hearing. “No doubt my ruling will be construed by some as authorizing large bonuses for executives. I do not believe that is the case. A bonus is something that you get over and above median compensation.”

Among the conditions to his approval, Drain said that he would provide for the “disgorgement,” or clawback of bonuses, “if it turns out later that any recipient of a payment has engaged in misconduct.”

But those provisions did not allay Tong’s concerns. In a statement, he said “the existing leadership of Purdue Pharma continues to make decisions that I do not believe serve our goal of confronting and ending the opioid epidemic.”

The bonuses would total up to approximately $5.4 million in “annual awards” and up to about $1.7 million in “long-term awards.” Scheduled to be made on June 30, the payments are conditioned on the company meeting benchmarks such as sales targets and product-development objectives.

Landau, who has been CEO since June 2017, could receive between about $1.6 million and $2.2 million for his annual award. He earned a base salary of about $2.6 million, according to court filings last year by Purdue.

“It is more important than ever that we maintain a strong, stable leadership team with the experience and expertise to drive the business through immense change as its assets are transferred to a new postemergence (from bankruptcy) company dedicated to the public good,” Purdue said in a statement. “Leadership must ensure seamless business operations, as we continue to manufacture FDA-approved medicines and other products, advance our diverse portfolio and pipeline of medicines in development and further public health initiatives that can potentially save and improve lives.”

Last November, Drain approved a bonus of about $3 million for Landau. In January 2020, he permitted a 2019 bonus of around $1.3 million for the chief executive.

“We have objected to this (latest) bonus and were overruled. We have similarly objected to other bonuses in the past and were overruled,” Tong said. “We continue to believe these bonuses are not in the best interest of the company and that these funds would be better directed towards combating the opioid epidemic.”

Tong also reiterated his opposition to Purdue’s settlement plan, which calls for the company to be dissolved to make way for a successor “public benefit company,” which would focus on using its resources to tackle the opioid crisis. He has vowed to appeal Drain’s approval of the framework.

Other opponents of the executive bonuses included the U.S. Trustee, which represents the Department of Justice in the bankruptcy, other states that also object to the settlement plan and several U.S. senators including Connecticut’s Richard Blumenthal.

“Aside from whether it is reasonable to pay yet more bonuses to insiders and senior executives, the payment of the bonuses under the debtors’ 2021 key employee incentive plans are based upon metrics that may not represent difficult targets — they may have actually become easier to attain than under prior plans — and are so vaguely described that it is impossible to determine their terms or to verify whether the insiders have actually met their targets,” U.S. Trustee William Harrington said in an objection filed in July.

Drain’s green light for the executive bonuses followed his approval in late July for the company to pay up to approximately $29 million in 2021 bonuses to the vast majority of its approximately 500 employees. The latter endorsement was conditioned on Purdue securing his approval of its settlement plan.

In their arguments for the lower-level employees’ bonuses, Purdue officials similarly cited their concerns about turnover. So far this year, 53 people have left the company, while 36 have been hired.