Glass Lewis is backing Carl Icahn’s push to oust Illumina’s boss and chair
Influential proxy adviser Glass Lewis has urged investors to vote against the reappointment of the chief executive and chairman of Illumina, the world’s largest gene sequencing company, saying the pair have failed to take responsibility for the “value-shrinking” acquisition of cancer screening group Grail.
The recommendation that shareholders withdraw their support for CEO Francis deSouza and Chairman John Thompson is a boost for activist investor Carl Icahn, who has launched a proxy fight against Illumina’s board over what he describes as its “reckless”[ads1]; purchase of Grail.
Glass Lewis said shareholders should instead support two directors proposed by Icahn, arguing that the Illumina board appeared “disturbingly disinclined” to accept any clear responsibility for the “costly, distracting and value-shrinking” decision to end the Grail transaction against the EU wishes. and US antitrust regulators.
The proxy adviser said its recommendation reflected its uneasiness about Illumina’s operating performance, value creation and overall corporate governance.
In a report, Glass Lewis gave Illumina an “F” grade for its executive pay program following the board’s decision to nearly double deSouza’s total pay in 2022 despite a drop in share price.
The proxy battle follows a tumultuous 18 months for Illumina, whose market value has fallen from $75 billion in August 2021 when it bought Grail to just over $30 billion this month.
Illumina is appealing EU and US Federal Trade Commission orders to sell Grail and faces a potential fine from Brussels of 10 percent of its annual revenue for closing the deal without regulatory approval.
Illumina shares rose a full 7 percent on Wednesday after the news.
Glass Lewis said the CEO and chairman recommendation was underpinned by concerns over the board’s decision to take the rare step of closing the Grail deal in the face of objections from regulators.
The proxy firm said Icahn had failed to prove certain claims he made about governance issues, including that Illumina’s Grail transaction was “fraught with related party-style conflicts of interest”. But it said the board’s defense of its decision to appoint Thompson as chairman of the company was “quite weak”, given his relationship with deSouza before he joined Illumina.
Thompson was CEO of Symantec at the time of its February 2006 acquisition of IMlogic, a company founded and led by deSouza. Both men worked together at Symantec for several years after the deal, which gave deSouza a “significant windfall,” according to the report.
Glass Lewis said the “optics” of the historical relationship between deSouza and Thompson should have contributed to the selection of a similarly qualified alternative candidate with no personal or professional connections to Illumina’s incumbent CEO.
Illumina said it disagreed with Glass Lewis’ recommendation: “The selection of Carl Icahn’s nominee would be disruptive to our core business. We recommend that shareholders vote for all of Illumina’s highly qualified nominees.”