BOSTON (Reuters) - It's not just a slowing growth of its main product and an 80 percent stock decline in five months that has some big investors in Irish drugmaker Elan riled up.
The company's board is under fire by some large shareholders to increase its oversight over what they consider a lax approach to cost-cutting and corporate governance.
Elan, whose most important product is the multiple sclerosis drug Tysabri, has suffered several blows recently.
While some of Elan's problems are outside its control, others are not, these investors say.
The biotech company is spread across three continents, and its management is equally far flung. Chief Executive Kelly Martin is based in a small office in New York. Its chief financial officer is based in Ireland, research and corporate communications functions are based in San Francisco, and its general counsel is in Pennsylvania.
And the company also has offices in Boston and the state of Georgia in the United States, and in Tokyo.
"It's strange to see this much dislocation of management," said Damien Conover, an analyst at Morningstar, echoing a view shared by some investors who question whether the company's structure lends itself to nimble, responsive action.
"What I would like to see is the CEO based in one of the company's headquarters, either in Ireland or in San Francisco," said Matt Strobeck, partner at Westfield Capital Management Company, which has $9 billion under management and holds 19.7 million Elan shares.
In a recent interview, Martin said the company was considering closing two locations as part of a cost-cutting effort. But investors would like to see the company exercise greater restraint on spending.
One bugbear is the company's use of private jets, among other forms of travel, courtesy of a contract with NetJets.
"I'm very disappointed that these guys are flying around in private jets," said Strobeck. "The company's science is terrific, but this diverts much-needed cash from research and development."
Private plane use by executives, while not uncommon, has become a hot button issue in the United States after the CEOs of Detroit's big three automakers flew to Washington, D.C. by private jet to plead for government financial aid.
For a company not making a profit, any private jet use sends the wrong signal, said Conover. "For a company where cash is of concern, it would not seem as though private jet use was the best use of resources."
It is not just private jet use that bothers those concerned about Elan's board oversight. They also point to Martin's role as director of Irish hedge fund Kinsale Capital Management.
Chief executives regularly sit on the boards of other companies. But Nell Minow, editor of The Corporate Library, which specializes in corporate governance, said it is unusual for a CEO to be a shareholder or director of a hedge fund since it raises potential conflict of interest issues.
"You really have to bend over backward in terms of disclosure to reassure the investment community that you are not benefiting from information you receive as CEO," she said. "It's something that must be handled very carefully and very transparently."
Elan did not disclose Martin's involvement with Kinsale.
Martin said through a spokesman that he is a non-executive director of Kinsale, that his initial investment in the fund was less than 1 percent of its value, that he no longer has an investment in Kinsale, and that he has no involvement in the operations of the fund.
Martin said the fund does not invest in Elan or its partners Biogen
Stutts said the company did not disclose the relationship because "this was not considered to be a matter of material interest."
Still, in November after questions from a reporter, Martin's name was removed from Kinsale's website. Stutts said Elan "is not in a position to comment" on Kinsale's investment strategy or web site.
(Reporting by Toni Clarke)
