"American conditions": CEO gets $205 mil. bonus after Dutch biotech company's takeover
The Dutch biotech company Merus is being acquired by fellow industry player Genmab. As part of the deal, Merus CEO Bill Lundberg is receiving a bonus of $205 million - the second-highest ever in the Netherlands. Dutch investors’ advocates are concerned by what appears to be a proliferation of increasingly large bonuses, AD reports.
“This doesn’t fit Dutch culture,” Gerben Evers of the Dutch Securities Holders Association (VEB), told the newspaper. He called the mega-bonus “American conditions,” pointing to Elon Musk’s recent $1 trillion bonus from Tesla.
The Netherlands is not quite there yet, but this is a far cry from the outrage ABN Amro caused with its $30 million bonus to CEO Rijkman Greonink after the bank was sold and shortly before the State had to step in and save it from bankruptcy.
Rients Abma of Eumedion, which represents the interests of institutional investors, is also concerned. The Netherlands has no legal remedies to address the ever-increasing bonuses, and that is a real problem, he told AD.
Both Abma and Everts have a particular problem with bonuses awarded during company acquisitions. Executives are often paid partly in shares and options. If they perform well, the stock price rises, and the shares and options become more valuable.
If there’s a takeover bid, which is typically considerably higher than the stock price, shares and options rise dramatically. But the executives haven’t done anything to generate that increase.
“A company is willing to pay a high takeover price because it sees all sorts of financial advantages in the acquisition. But those advantages are realized by the new owner, not by the director of the acquired company, because they often have to step down. So they receive a bonus for no work done,” Abma told AD.
According to Abma, CEOs should sell their shares and options for a maximum of the stock price before the takeover bid.
Everts wants to go even further, advocating for a “defendable bonus.” Everts: “I’m thinking of a bonus of 2 to a maximum of 4 million euros for directors. That’s an explainable maximum remuneration. It should be enshrined in law.”
The highest bonus in Dutch history went to Rick Clemmer, CEO of chipmaker NXP. He collected $448 million when a takeover was mid for the company.
And these aren’t exceptions. Lucian Grainge, CEO of music group UMG, received $195 million upon its IPO in 2022. Fabricio Bloisi, CEO of tech investor Prosus, will get $100 million if he achieves certain targets in the coming years. JDE Peet’s CEO, Rafael Oliveira, also has a €60.5 million bonus waiting if he meets expectations.
