ZTwo major shareholders of the US medical device manufacturer Masimo are up in arms about a clause in the contract that would give CEO Joe Kiani around $600 million if certain changes were made to the board. The second-largest US pension fund, CalSTRS, announced that it intends to join forces with activist investor Politan Capital to take legal action against the provision in Kiani’s contract. After that, he gets the money if he loses one of his two positions as CEO and chairman, the company appoints a special representative of the independent directors, or more than a third of the five board members are replaced within two years.
Masimo, a maker of medical monitoring equipment, is valued at over $9 billion on the stock market. Politan holds nine percent of the shares and is interested in a seat on the board, the most important company body under US corporate law with combined management and supervisory functions. Two of the board members are up for election at this year’s shareholders’ meeting.
California teachers’ pension fund CalSTRS is a sizeable investor with $311 billion in assets under management and has had a stake in Masimo for more than a decade. The agreement is not in the best interests of shareholders and could set a dangerous example, said Aeisha Mastagni, portfolio manager at CalSTRS.
Masimo explained that the controversial clause was decided seven years ago and made known to the shareholders. It had the desired effect because the value of the company had more than quadrupled under Kiani. A Delaware judge last month denied a motion by Masimo to dismiss the shareholder lawsuit. The judge spoke of an “amazing sum” that was earmarked for Kiani.