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Pay Levels for ICN Executives Tied to Stock

Compensation: Vote means incentives will be based on price of Costa Mesa company's shares compared to S&P 500 average.


COSTA MESA — ICN Pharmaceuticals Inc., joining a trend among American corporations, on Wednesday approved a new incentive plan tying executives' compensation more closely to the company's stock performance.

In a move long sought by institutional investors, shareholders approved a long-term plan that rewards executives with stock if the Costa Mesa drug company's stock performance exceeds that of the Standard & Poor's index of 500 stocks for three years.

Investment analysts welcomed the company's new incentive plan, saying it is a departure from the company's past practice of rewarding executives based on the company's financial performance, rather than on its stock performance.

ICN's new plan "aligns the interests of management with those of shareholders," said William Naskovitz, president of Heartland Advisors Inc., a Milwaukee money manager that controls a 12% stake in ICN.

Bob Back, an analyst with BackFocus, a Chicago consulting firm, said the plan should make the company more attractive to institutional investors. Back said the new policy also should help prevent such incidents as Chairman Milan Panic's alleged insider sale of $1.24 million of company stock in November 1994, which triggered shareholder lawsuits and federal investigations.

Panic sold the stock after the company learned that the Food and Drug Administration would not approve its star drug Virazole as a stand-alone treatment for the liver ailment hepatitis C. The company didn't disclose the FDA's decision to investors until February 1995. After the disclosure, ICN stock lost 42% of its value in six days of trading, falling to $13.25.

Panic and the company are the target of investigations by securities' regulators and the U.S. attorney's office. Panic is also a defendant in a paternity action and sexual harassment lawsuit filed by a former employee. Panic and ICN have denied any wrongdoing.

A company official noted after the meeting that one shareholder suit against ICN board members that stemmed from the alleged insider trading incident was recently dismissed.

The company's legal troubles received only slight mention Wednesday during the annual meeting at the company's headquarters. Panic, in his remarks to shareholders, made vague references to the company's various legal problems, emphasizing instead ICN's record financial results in the last year and its prospects for the future.

Under the new executive incentive plan, which is retroactive to April 1, senior-level managers first would become eligible for stock grants in three years if the company's shares outperform the S&P 500. An executive similarly would be eligible for grants in future years. Robin Ferracone, a senior vice president of the Los Angeles consulting firm, Strategic Compensation Associates, who designed the long-term incentives, described it as a "very tough program."

"It's intended to focus management on creating superior shareholder returns--and it's intended to pay out significant awards if they are able to do that," she added.

ICN shares, which hit a 52-week high of $27.75 a share on May 22, closed at $26.675 a share Wednesday, down 67.5 cents, in trading on the New York Stock Exchange.

After the meeting, Panic and other board members acknowledged there have been recent rumors about a possible acquisition of ICN by another company, but refused to comment.

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