AUTH/2965/8/17 - Anonymous employee v Biogen

Company culture and bonus scheme

  • Received
    07 August 2017
  • Case number
    AUTH/2965/8/17
  • Applicable Code year
    2016
  • Completed
    22 March 2018
  • No breach Clause(s)
  • Additional sanctions
  • Appeal
    Appeal by respondent

Case Summary

An anonymous, contactable complainant, who described him/herself as a current employee of Biogen Idec, alleged that over the last five years, field-based employees had received huge bonuses and other performance incentives, which the complainant considered was unethical and against the Code. The complainant was concerned that the perception of this, particularly when compared with the salaries of health professionals, was unethical at best and tantamount to ‘buying prescriptions’ at worst. The complainant was sure that all of the benefits in addition to basic salary needed to be considered in terms of total bonus awards as there was a direct link to product sales.

The detailed response from Biogen is given below.

The Panel noted Biogen’s submission about the burden of proof. The Panel noted that as stated in Paragraph 2.2 of the Constitution and Procedure rulings were made on the basis that a complainant had the burden of proving his/her complaint on the balance of probabilities. This was reflected in the Introduction to the Constitution and Procedure which also stated that complaints were judged on the evidence provided by the parties.

The Panel noted that the Code required that representatives must be paid a fixed basic salary and any addition proportional to sales of medicines must not constitute an undue proportion of their remuneration.

The Panel noted that there appeared to be some differences between the company’s initial and supplementary response. Biogen initially stated that field-based bonus payments comprised a territory target bonus opportunity which was not linked to scripts or activities and which was triggered only when a certain high percentage of target was achieved. Biogen subsequently submitted that a sales representative would only receive a bonus at the point when a higher percentage of the target was achieved. Below this no bonus payment would be paid. It was unclear which was the correct figure. No supporting material had been provided. In addition, further information from Biogen made it difficult to understand how a target based on sales could not be linked to scripts as stated in the initial response.

The Panel noted Biogen’s submission that remuneration included basic salary, car allowance, pension contribution and medical benefit payments. The Panel noted that up until some years ago the bonus/remuneration calculation included incentive trips which apparently were reflected as remuneration. Details were provided. The Panel did not accept Biogen’s submission that incentive trips were not relevant for the purposes of Clause 15.7. They were treated by Biogen as part of the representatives’ remuneration which was a fundamental part of the calculation of bonus as a percentage of remuneration. More recently the initiative was changed to a cash award which was also included as part of the bonus/remuneration payments calculation and a more restrictive bonus ceiling implemented.

The Panel noted Biogen’s submission that, due to exceptional circumstances in one given year, an exceptional bonus was paid. In other years the % of remuneration received as a bonus was lower including that for sales managers (details provided). The majority being below 30%. The Panel noted Biogen’s submission that when interpreting Clause 15.7 undue proportion should be construed as a level which did not incentivise behaviour which was inconsistent with the Code. The Panel queried whether 30-40% remuneration as a bonus was in line with the requirements of the Code. The Panel did not consider that 50-60% remuneration as a bonus was in line with the Code and a breach was ruled accordingly.

By paying a high percentage of remuneration as a bonus in one given year Biogen had failed to maintain high standards. A breach of the Code was ruled.

The Panel did not consider that the circumstances warranted a ruling of a breach of Clause 2 of the Code which was a sign of particular censure and reserved for such use. No breach of that clause was ruled.

On appeal by Biogen the Appeal Board did not accept Biogen’s submission that the Panel had applied a fixed threshold when interpreting the Code. That was not so. The Panel had referred to Biogen’s submission that the level of bonus should not incentivise non-compliant behaviour. The Appeal Board considered that all the circumstances should be taken into account when deciding whether or not the level of bonus was in line with the requirements of the Code including whether non- compliant behaviour was incentivised. However, the Appeal Board did not accept Biogen’s inference that evidence of such non-compliant behaviour was required before a breach of the Code could be ruled. The Appeal Board noted that the Code referred to ‘an undue proportion’ of remuneration which it considered in the absence of any relevant cases, was for companies to determine. It was not for the Panel to issue guidance and the Appeal Board noted Biogen’s submission on the potential implications of an imposition of a ceiling on permitted payments to employees. In the Appeal Board’s view, there was no procedural unfairness in this regard contrary to the submission by Biogen.

The Appeal Board noted Biogen’s submission about the salary survey and common industry practice and considered that whether a bonus level was common industry practice would not alone determine whether a bonus contravened the Code. The Appeal Board noted that the 2017 industry bonus data provided by Biogen was based on an average of median base salaries. The Appeal Board noted that Biogen’s bonus was a percentage of an overall remuneration package, rather than base salary.

The Appeal Board noted further and better particulars of the circumstances surrounding the payments in question were provided to the Appeal Board which were not made available to the Panel.

The Appeal Board noted Biogen’s submission that this payment had been caused by its failure to accurately predict sales for a medicine. The company had subsequently taken steps to adjust its bonus scheme for sales of that medicine. The Appeal Board decided that whilst it did not consider that 50-60% remuneration as a bonus was necessarily acceptable in relation to the requirements of the Code, in the particular circumstances of this case the payment was clearly an outlier based on exceptional circumstances, including an inaccurate sales forecast. It did not appear to be sustained or common practice within Biogen to pay such bonuses. Steps had been taken to remedy the situation and only one payment was made. The Appeal Board ruled no breach of the Code. The Appeal Board did not consider, therefore, that high standards had not been maintained and it ruled no breach of the Code. The appeal on both points was successful.