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Investing isn't just buying shares in a hot ticker; it's putting your hard-earned money in the future of a business -- and, often overlooked, trusting management to execute on that vision of success. When it comes to Celgene, are investors in good hands or is their faith misplaced?
In order to help you answer this question, our dedicated health-care team has composed a brand-new premium research report that explains Celgene's market opportunity, risks, and reasons to both buy and sell today. The following excerpt from the report takes an in-depth look at Celgene's man in charge.
Investors should focus on three critical factors when it comes to a company's leadership, especially the CEO role. One factor is how the executive's background equips him or her to lead the company for the future. Another key factor is how closely the executive's priorities are aligned with the long-term interests of shareholders. Last, and most importantly, the leader must produce good results.
Celgene's CEO, Robert Hugin, scores well on the first factor. Hugin joined Celgene in 1999 as chief financial officer. He previously served as a managing director with J.P. Morgan. Hugin remained in the CFO role through 2006 when he moved into the chief operating officer slot. He became Celgene's CEO in 2010 with the previous CEO, Sol Barer, moving into the executive chairman position. Hugin was named chairman of the board in 2011.
His experience as CFO for seven years and as COO for four years provides Hugin a unique perspective that many CEOs don't have. That combination of financial and operational knowledge of Celgene should be a great asset as he guides the company.
Hugin also rates highly with respect to the second factor relating to alignment with shareholder interests. His background is not one of hopping from company to company making decisions only for the short term. Hugin's promotion to CEO appears to be the result of a carefully executed succession plan influenced largely by Barer, one of the founders of the company.
The compensation for Hugin and other key executives also looks good from a shareholder perspective. Eighty-five percent of the top executives' total compensation is performance-based. Of that, 20% is in the form of short-term bonuses while 80% is from long-term incentives such as stock options and restricted stock units. The criteria for the short-term bonuses align squarely with shareholder interests, including targets for solid revenue and earnings growth and clinical advancement for key pipeline drugs.