ILJIN SNT Co., Ltd. Calls for Board Restructure at Aurinia Pharmaceuticals
SEOUL, South Korea, May 20, 2024 /PRNewswire/ —
Fellow Aurinia Shareholders,
ILJIN SNT Co., Ltd. and its affiliates (collectively, “ILJIN“) is a long-term holder of more than 5% of Aurinia Pharmaceuticals Inc. (“Aurinia” or the “Company“) and has been supportive of the Company’s mission since 2010 when we invested in the predecessor company, Isotechnika. As one of the largest and longest-standing shareholders, we have had the privilege of supporting the Company through its drug development efforts and subsequent FDA approval of LUPKYNIS. We have also supported the CEO, Mr. Peter Greenleaf, having voted in prior years for his re-election to the Board.
Like other shareholders, we have been greatly shocked and dismayed to see the share price plummet since the Company’s announcement on February 15, 2024 of FY 2023 operational results and the unsuccessful conclusion of its 7-month long strategic review process.
The Company recently announced its Q1 2024 operational results. While the Q1 2024 financials showed some improvement, there has been no sign of share price recovery despite the Q1 performance improvement. If anything, the stock performance following the recent earnings report has reinforced the market perception that there remain substantial uncertainties surrounding the Company’s new corporate strategy (focused on commercial execution of LUPKYNIS) announced in February. We believe that if we choose to ignore and do not respond to these alarming developments, we may only see our shareholder value further eroding going forward.
In response to these concerning developments, we wrote to management and the Board of the Company in March, and have voiced our concerns and requested changes to the management and also the Board’s role as the supervisor of management’s performance. However, we only received inadequate responses from the Company reciting its prior statements.
As one of the long-standing shareholders, we now believe it is imperative to demand management’s accountability, in order to put the Company back on track. If the Company does not change paths despite the massive losses shareholders have suffered during the past several months, it would only mean that there is no alignment of interests between company management and shareholders, and that it is time to establish a system within the Company to enforce management’s accountability.
It is simply not right that while shareholders are suffering major losses, those same executives and Board members responsible for such losses continue to collect hefty amounts of compensation — including substantial amounts of free RSUs — from the Company as if nothing had happened. In our view, the only way we can enforce accountability is to make our Board an independent board, and what this means is that the Board composition must be changed, so that the Board may effectively act as a check and balance to Company management.
For these reasons, Mr. Greenleaf should no longer serve on the Board and should only serve as the CEO going forward. As the Company’s CEO, Mr. Greenleaf will be able to continue to implement his new corporate strategy (focused on commercial execution) announced in February, while the Board without Mr. Greenleaf’s participation will be able to discuss and determine the validity of the new corporate strategy independently and evaluate management’s performance objectively.
In addition, given the Company’s continued poor performance and its single-minded focus on LUPKYNIS (by foregoing all other growth options such as AUR 200 and AUR 300), it is important and necessary that the Board’s size be kept to a bare minimum and no new board member should be allowed until after the Company has showed a clear sign of a turnaround.
In view of the foregoing, ILJIN’s intends to vote as follows at the Company’s upcoming annual meeting:
- As explained above, Peter Greenleaf should no longer serve on the Board and should serve only as the Company’s CEO going forward. Although we have previously supported Mr. Greenleaf’s board membership, it has become patently clear that his influence over the Board’s composition and operation is so significant and prominent that the Board cannot serve its critical role of providing independent oversight of management. While we believe the ultimate responsibility for poor management performance and destruction of shareholder value lies with Mr. Greenleaf, the Board has not and is not willing to hold Mr. Greenleaf accountable for all those management mishaps. ILJIN intends to vote “withhold” on the re-election of Peter Greenleaf to the Board.
- In response to its letter to management and the Board in March, ILJIN has received a reply letter from the Board chairman, Daniel Billen. Based on his reply, Mr. Billen appears unable or unwilling to exercise any meaningful oversight over management’s performance. So, in our view, Mr. Billen is unqualified to operate the Board as an independent board, and so should no longer serve on the Board. ILJIN intends to vote “withhold” on the re-election of Daniel Billen to the Board.
- In September 2023, the Company agreed to add yet another member to an already-excessive Board, and ILJIN believes Dr. Robert Foster should not be elected to a full term on the Board. Given the Company’s revised business strategy to focus solely on commercial execution of LUPKYNIS, ILJIN believes Dr. Foster clearly cannot add any new value to the Company’s management. ILJIN intends to vote “withhold” on the election of Dr. Robert Foster to the Board.
- In light of the dire performance of the Company’s share price, the management compensation plan must be rejected. Following a dismal 38.6% say-on-pay vote in 2023, rather than reforming management compensation to align with stockholder interests, the Board has proposed a management compensation plan that is divorced from the Company’s performance metrics, and ILJIN believes options and RSUs must not be freely granted regardless of the Company’s performance — particularly when shareholder value is utterly shattered. ILJIN believes the fact that such a management compensation plan is proposed in these dire times shows that the current Board is not performing its fiduciary duties properly and only interested in enriching corporate executives and Board members at the expense of further shareholder dilution. ILJIN intends to vote “against” the advisory resolution on executive compensation and “against” the amendment to the Company’s equity incentive plan.
- We echo the recent message from other shareholders, such as Lucien Selce, that the Board is severely bloated and excessively compensated. So, we agree that the Board must be downsized, and each shareholder should determine which Board members it will be voting to withhold against at this time to keep the Board to a bare minimum. While we clearly see several additional Board members having no fit for the Company’s revised business strategy, we do not believe it is appropriate for us to specify those individual Board members here.
ILJIN believes that the changes above are necessary to strengthen the Board’s role as a supervisor of management’s performance and to enforce management accountability going forward, and respectfully request other shareholders’ support for the changes.
Sincerely,
KH Sung
CEO of ILJIN SNT Co., Ltd.
Media contact: Yoonwha Lee, [email protected]
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