Noven Execs Got Bonuses Despite 2 Product Recalls

Noven rewarded its top managers with hundreds of thousands of dollars in bonuses last year despite the company's flagship Daytrana ADHD patch being mired in two product recalls.

Noven has had a rough couple of years. The FDA identified manufacturing problems with Daytrana back in 2007, and they still aren't fixed. Consumers had difficulty peeling the backs off the patches properly, with the result that twice in 2008 the company had to recall its products.

Noven's revenues and net income both went up, although the latter (just $21 million) was reduced by a $4 million charge the company had to pay its sales partner, Shire, for screwing up the Daytrana patches. And the company warned in its 10K that it might not have seen the end of its recalls:

... we expect the peel force issue to continue to negatively affect margins...

How did this amateur-hour performance affect the compensation of Noven's top execs? They all got cash bonuses. Although the total compensation of the company's top execs stayed roughly the same, their cash and perks -- 401(k)s, life insurance, "airline club membership," etc -- all went up.

Here's the summary table:

Name, 2008 pay, 2007 pay, 2008 cash bonus
CEO Peter Brandt (pictured), $2 million, NA, $366,000
Ex-CEO Robert C. Strauss, NA, $3.9 million, NA
EVP Jeffrey F. Eisenberg, $1 million, $753,000, $182,000
CFO Michael D. Price, $571,000, $52,000, $129,000
VP operations Richard P. Gilbert, $549,000, NA, $117,000
Chief science officer Steven M. Dinh, $383,000, $80,000
Chief medical officer Joel S. Lippman, $319,2000, NA, $73,000
Chief technical officer Juan A. Mantelle, $659,000, $659,000, $115,000 "Pay" includes cash, perks, and stock and options whose value changes over time. The cash bonus is included in the "2008 pay" number.

You'll notice that four of these folks are new to the company in 2008, and one (the ex-CEO) left at the beginning of the year. Dinh and Lippman got signing bonuses -- meaning they were paid extra just for showing up.

It is perhaps not surprising that these execs earned their bonuses. Here are the range of criteria that the compensation committee looks at to decide whether an exec gets a bonus:

... total or net revenue; revenue growth; EBIT or EBITDA; operating income; net operating income after tax; pre-tax or after-tax income; cash flow; cash flow per share; net earnings; earnings per share; profit growth; return on equity; return on capital employed; return on assets; economic value added (or an equivalent metric); share price performance; other earnings criteria or profit-related return ratios; successful mergers, acquisitions of other companies or assets and any cost savings or synergies associated therewith; successful dispositions of subsidiaries, divisions or departments of Noven or any of its subsidiaries; successful financing efforts; total stockholder return; market share; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; debt reduction; or FDA regulatory milestones, such as product approval.

In sum, execs get bonuses based on pretty much anything that the company could possibly do.

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