Influential proxy advisor Glass Lewis urged investors to vote against the reappointment of CEO and chairman of Illumina, the world’s largest gene sequencing company, saying the two failed to take responsibility for the “value-damaging” takeover of cancer screening to take over the company Grail.
The recommendation for shareholders to withdraw their support for board chairman Francis deSouza and chairman John Thompson gives a boost to activist investor Carl Icahn, who has launched a proxy war against the Illumina board over what he describes as a “reckless” purchase of Grail. has begun.
Glass Lewis said shareholders should instead support two of Icahn’s proposed directors, arguing that the Illumina board is “disturbingly reluctant” to accept any clear responsibility for the “costly, distracting and value-damaging” decision to enter into the Grail transaction against the will complete the EU and US antitrust authorities.
The proxy advisor said his recommendation reflects his unease about Illumina’s operating performance, value creation and overall corporate governance.
In a report, Glass Lewis gave Illumina an “F” grade for its executive compensation program after the board’s decision to nearly double deSouza’s total compensation in 2022 despite a drop in its stock price.
The proxy fight follows a turbulent 18 months for Illumina, whose market cap has fallen from $75 billion in August 2021, when the company acquired Grail, to just over $30 billion this month.
Illumina is appealing EU and US Federal Trade Commission orders to divest Grail and faces a possible fine from Brussels of 10 percent of its annual sales for closing the deal without regulatory approval.
Illumina shares rose as much as 7 percent Wednesday following the news.
Glass Lewis said his recommendation for the chief executive officer and chairman was underpinned by his concerns about the board’s decision to take the rare step of completing the Grail deal amid objections from regulators.
The proxy firm said Icahn failed to substantiate certain claims he made on governance matters, including that Illumina’s Grail transaction was “riddled with related party-style conflicts of interest.” However, the board’s defense of its decision to appoint Thompson as chairman of the company was “pretty weak” given his relationship with deSouza prior to joining Illumina.
Thompson was CEO of Symantec when Symantec acquired IMlogic, a company founded and owned by deSouza, in February 2006. Both men worked together at Symantec for several years after the deal, which the report said was a “significant win” for deSouza.
Glass Lewis said the “optics” surrounding deSouza and Thompson’s historic relationship should have aided in the selection of a comparably qualified alternate candidate unconstrained by personal or professional ties to Illumina’s current CEO.
Illumina said it disagreed with Glass Lewis’ recommendation: “Electing Carl Icahn’s nominees would disrupt our core business.” We encourage shareholders to vote for all of Illumina’s highly qualified nominees.”