--This article was written by Ronald Orol of The Deal
The plunge in Valeant Pharmaceuticals International Inc.'s (VRX) stock price on Tuesday after the embattled drug company warned that it might default on some debt casts a spotlight on its board of directors, especially its chairman, Robert Alexander Ingram, who governance experts view as "overboarded," that is, a member of too many boards to serve effectively on all of them.
He's pretty heavily loaded and that should be of some concern," said Charles Elson, chief of the University of Delaware's Center for Corporate Governance.
According to data compiled by Deal affiliate BoardEx, Ingram,73, sits on four public company boards, including one based in Ireland, as well as three private company boards. In addition, he's a general partner at Hatteras Venture Partners and a senior adviser at GHO Capital Partners LLP.
Concerns around Valeant's chairman's various roles comes as the drug company's stock price dropped by more than 50% to close Tuesday to around $33.51 a share, precipitously lower than its high of about $262 a share in August. The Canadian drug-maker shocked the market on Tuesday when it slashed its 2016 financial guidance significantly below its prior estimates, and said it might default on its debt. On Wednesday, in mid-day trading, Valeant traded slightly up at $33.78 a share but still significantly below its close on Monday.
In addition to his roles at Hatteras and GHO Capital and chairman role at Valeant, Ingram is a board member at the publicly traded companies Cree Inc. (CREE), Biocryst Pharmaceuticals Inc. (BCRX) and Malin Corp. PLC, which is listed in Dublin. In addition, he is chairman of both Novan Inc., and Viamet Pharmaceuticals Inc. and a director at PhaseBio Pharmaceuticals Inc., all privately traded companies.
Elson contends that generally speaking independent chairmen face more responsibilities and challenges than a rank-and-file director and that directors in those positions are paid for those responsibilities. However, he added that chairing Valeant as it attempts to recover from its various issues must be a particularly challenging endeavor.
"During less hectic times, he would be a very busy guy but being the chairman of Valeant during this difficult period, you have to hope that his other interests don't conflict with his ability to focus on this company," Elson said. "It makes you wonder whether he's fulfilling his responsibilities or short changing the other boards he's on."
Another academic, who requested anonymity, noted that Ingram is involved in a number of pharmaceutical-focused companies and he raised concerns about whether Ingram was meeting his duty of loyalty requirements to the various boards he sits on.
Ingram joined Valeant's board in 2010 and was the chairman from December 2010 to March 2011 before becoming the company's lead director. Valeant's CEO, J. Michael Pearson, left on medical leave in December and returned late last month. However, Pearson did not take back his previous role as chairman, which went to Ingram, who had been filling that role in an interim manner. Ingram had previously been chairman and CEO of Glaxo Wellcome and co-led the blockbuster merger that formed GlaxoSmithKline in 2000.
Last week, Valeant expanded its board size with the addition of three new directors, including a vice chairman from activist investor Pershing Square Capital Management LP. At the time, Ingram said in a statement that the company was considering whether to expand its board further with "additional candidates who have complementary perspectives and experience."
On Wednesday, Valeant responded to a request by The Deal for comment by noting that Ingram is "actively engaged" as a director and chairman of the drug company and that he "commits a substantial amount of time" to its affairs "in order to appropriately discharge his duties." In addition, Valeant said his service is highly valued by the board and in compliance with its corporate governance policy and the policies of the major proxy advisory services.
The National Association of Corporate Directors recently revealed in its 2014-2015 annual survey of directors that board time commitment is on the rise. Adding a new category of "informal meetings/conversations with management," the NACD said that respondents said they spent an average of 278 hours annually in commitments to a particular board, up from last year's 236 hours.
A governance researcher at an advisory firm noted that directors will devote between 30 and 40 days of the year to a particular board. Based on an initial review of Ingram's commitments and challenges at Valeant, he concluded that Ingram is probably over-committed, particularly because of the crisis situation at Valeant.
Trouble first started for Valeant after short-seller activist Andrew Left of Citron Research issued an eight-page note on the firm's website in October alleging that there was a secret relationship between Valeant, a mail-order pharmacy called Philidor Rx Services, and a Philidor customer, R&O Pharmacy LLC.
The report drove share prices down significantly and led to a federal investigation launched in October. Valeant at the time called Left's presentation "sensational" and "untrue" in a conference call with analysts. Valeant has since ended its relationship with the mail-order pharmacy.
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