Since mid-2017, Investors for Opioid Accountability (IOA), a coalition founded by Mercy Investment Services and the UAW Retirees Medical Benefits Trust, has become the leading shareholder force in the fight against the opioid epidemic ravaging the United States. It now represents 54 investors with more than $3.5 trillion in assets under management. In 2017, more than 70,000 Americans died from drug overdoses, the most ever in a single year. Of the 700,000 American deaths from drug overdoses since 1999, more than two-thirds were from opioids and many involved prescription opioids.
To address this epidemic that is devastating families and communities, in addition to stressing our healthcare system, IOA leverages investor power at pharmaceutical manufacturers and distributors; IOA has expanded its work to include the retailers CVS, Rite Aid and Walgreens Boots Alliance (Walgreens).
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Given more than 1,000 claimants in multidistrict litigation consolidated in Ohio—as well as litigation at the state and local levels, the IOA is concerned about the financial and reputational risks posed by companies’ opioid business. Litigation briefs and company engagements have shaped the IOA’s views on improving corporate governance practices to strengthen corporate culture, board accountability, compensation incentives and risk mitigation. The IOA assesses each company and identifies practices that can strengthen board oversight. Resolutions address these best practices and may include asking for an independent chair, board oversight of risk, clawback of executive pay after misconduct, excluding legal costs from compensation metrics and/or oversight and disclosure of corporate political spending and lobbying.
Investors are giving significant support to opioid-related resolutions. A majority of shareholders have voted FOR board oversight resolutions at three companies: in 2018, 63 percent at Depomed (now Assertio Therapeutics) and 57 percent at Rite Aid; in January 2019, 61 percent at Walgreens. Another 41 percent voted for the resolution at AmerisourceBergen last year. This success is buoyed by recommendations FOR from proxy advisors ISS and Glass Lewis.
Perhaps more importantly, the IOA has achieved many settlements. Ten of the 13 companies we asked to produce a board risk report have either published a report online or are finishing their reports. Only two board risk report requests remain on proxy ballots for 2019. Similarly, 12 of the 15 companies engaged about misconduct pay clawbacks now have robust policies; we expect the remaining three to be on proxy ballots.
Even after these successes, the IOA remains concerned with and committed to bringing solutions to this epidemic. IOA continues to engage 13 companies on corporate governance reforms that help assure investors companies are monitoring opioid-related reputational and financial risks. The resounding shareholder support at least partially reflects public concern; many people recognize or are affected by opioids in their communities, making most companies anxious to engage with shareholders. In the coming months, IOA will also monitor the progress of the companies it has engaged and evaluate other potential engagements related to stemming the opioid epidemic.
