Corporate governance in Mallinckrodt Pharmaceuticals IncCompany: Mallinckrodt Pharmaceuticals Inc.

Mallinckrodt Pharmaceuticals is a public limited company headquartered in St. Louis, Missouri. It deals with the production of specialty pharmaceutical products inclusive of imaging agents and generic drugs. The company manufactures products used in diagnostic procedures and in the treatment of pain-related conditions.

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Board Independence

This important mechanism ensures effective governance in any organization. In Mallinckrodt Pharmaceuticals, the board has taken into consideration the independence of its members and has also reviewed the organizations that its members are affiliated to and established that no such business relationships are material to them, the organizations involved or the directors. As such, each of the company's director nominees is independent and satisfies the criteria for nomination. Therefore, since the directors are independent, the board of directors is also independent. Fundamentally, independence is clearly defined such that the directors do not have interest in the company that is capable of affecting the genuine independence and objective judgment (DAF 14A, 2018).

Board Over commitment

Companies perform better when corporate board members are not overcommitted. In Mallinckrodt Pharmaceuticals, the CEO and the chair of the board are two designations held by different people. The separation of the duties gives the chief executive officer ample time and space to focus on managing the company business and operations and gives the chair enough chance to focus on board matters, more so in the light of the high level of regulation and scrutiny of public company boards. According to Mallinckrodt, this separation allows the independence of the board in its role of oversight duties of evaluating and assessing the chief executive officer and management (DAF 14A, 2018).

Board Size

Board sizes need to be determined by the size of the company so that the performance of the firm can improve. According to agency theory, optimal corporate board size performs its duties of advising, monitoring, and disciplining management and hence improving the performance of the firm in the industry (Band, 1992). In Mallinckrodt Pharmaceuticals, the board size is congruent to the firm size employing more than 5000 employees (DAF 14A, 2018).

Board Compensations

In Mallinckrodt pharmaceuticals, there is the human resources and compensation committee that reviews and approves policies and objectives on compensation and benefits. The committee determines if employees are compensated according to the objectives and perform board responsibilities that are related to executive compensation. Having this committee is a milestone in this company because it ensures harmonized compensations and limits exaggerations (DAF 14A, 2018).

Board Perks

The company has passed a structure to use in compensating its directors, which consists of equity awards, annual cash retainer, and supplementary cash retainers. These rewards are important to the board members because they offer a motivation to them and instil hard work ethics in them (DAF 14A, 2018).

Succession Planning

There is the Nomination and Governance Committee responsible for reviewing the succession planning process relating to the chief executive officer and other board members in this company. It has a clear outline of the procedures followed for one to earn a promotion or become a member of the board of directors. Through elections held during the company's annual general meeting, board members are elected to serve for one year (DAF 14A, 2018).

Executive Pay

Executive pay at times tends to go overboard depending on the management. These managerial excesses are able to render a company bankrupt and hence liquidated as a result. However, since its incorporation in 2013, it has continued to grow, meaning that their executive payments are within the company's expenditure limits (DAF 14A, 2018).

Annual Board Election Meetings

At Mallinckrodt pharmaceuticals, the election of board members is done yearly and the elected members serve for one year. A board member can be re-elected on successive years depending on his output and other factors. Shareholders vote for the board of directors. As demonstrated, the company has outlined clear election guidelines for members of its board of directors. This outline ensures smooth transition and continuity within the company management and board (DAF 14A, 2018).

Poison Pills

This strategy is aimed at shielding a company against a takeover bid through use of new, prohibitive cost that should be paid after the takeover. According to the Mallinckrodt pharmaceuticals proxies, director stock award replaced the company's pension plan for directors. This meant that the amount of stock would be large such that no company could afford to present a bid to take over the company (DAF 14A, 2018).

References

Document. (n.d.). Retrieved from https://www.sec.gov/Archives/edgar/data/1567892/000156789218000012/def14a2018.htm Band, D. (1992). Corporate governance: Why agency theory is not enough. European Management Journal, 10(4), 453-459.