Was it a bad look for Pfizer boss to sell his shares?

Let’s talk about the big financial elephant behind the vaccine story.

The chief executive of Pfizer appears to be both a hero and a villain. Shareholders must be delighted and devastated. Staff at the company will be bursting in pride, but puzzled their boss has no faith in them. And the world’s press seem to have taken a slightly cynical, but facts-only approach to reporting one the largest cases of misalignment in corporate values we’ve seen in years.

Greek veterinarian Albert Bourlas, chief executive of Pfizer, has sold 62 per cent of his shares in the company (a value of NZ$8 million). This happened on the day he told the world the Pfizer vaccine was 90 per cent effective.

Let’s say upfront, this is not illegal. He has a safe harbour defence against insider trading accusations due to a “10b5-1” plan. If insiders prearrange their share sales, they can’t be accused of using prior knowledge.

Key executives owning shares isn’t a bad thing, either. Generally it creates an alignment in values, when a scheme is well planned.

That said it’s time to shoot some holes in this fiasco. It might be legal, but it also shows us how easy it is to weave a legal line under the spirit of the law and the spirit of alignment.

Bourlas has been chief executive for one year and 10 months. He had a long career with Pfizer including time spent as the global head of vaccines and is paid a salary of NZ$2.4 million a year. Some time in February Bourlas set up an automatic order with his broker to sell 62 per cent of his holdings at a pre-agreed price. That’s a lumpy divestment plan for someone 13 months into a job.

On March 17, Pfizer announced an agreement with BioNTech to co-operate on a vaccine design. Animal testing proved successful and the phase 3 human trials began on July 27. Three weeks later on August 19, Bourlas reconfirmed to his broker that his pre-scheduled sale should stay in place. It would get executed if the share price hit US$42.

This was the point a giant red buzzer should have been smacked with a mallet.

Internally at Pfizer, either Bourlas, his board, an ethics committee or the head of remuneration, should have stepped back and said, “hey does this really feel right”.

Pushing the red buzzer doesn’t involve a tricky thought process.

Under the continuous disclosure rules we need to tell the market any material developments. Our first announcement could be positive, but won’t have regulatory approval or even the final results. If we end up with first-mover advantage it will fill our order book, drive up our share price and make us look like world heroes.

Hang on, Bertie’s got a sell order in the market. Anyone know how much he’s trying to sell? Sixty-two per cent. Seriously? So he’s not just short of dough for the school fees or a mortgage payment. What level is his order? Hmmm $42 and that’ll put $5 million in his bank account. How’s it going to look if that order gets hit before we successfully deliver this vaccine? In corporate speak that translates to “do his actions still give us alignment?”

We could probably give Pfizer our own pithy little analysis.

1. Shareholders: Oh hell, he thinks this thing is going tits up. He knows other vaccines will come out and he’s banking his pension fund just incase they are better, easier to deliver, cheaper or have quicker production. What do I do? This guy has no faith.

2. Staff: Someone switch off the internet connection to the lab. They’re going to bounce off the walls when they hear this. Bouras has just taken a 60/40 bet against us. What the heck is he doing?

3. Customers (every human being): That sly dog just made $5 million and I don’t even know when I’m going to get my jab and have a normal life again.

After an analysis of 20 seconds, someone needed to grab Bertie’s sell-order and bin it. Tell him he’s doing a lovely job, but remind him that alignment means getting the final results, regulatory approval, delivering this thing to the doctors’ surgery, and probably waiting a few more months before taking that well-earned bonus. Yes it would be wise for most investors to bank some early profits, but you’re not a trader and we need you to complete the job.

All companies need to seriously look at their ethics and management alignment under a divestment plan. Standing in a legal vacuum offers no protection from being sucked into a hole filled with mistrust.

Janine Starks is the author of www.moneytips.nz and a financial commentator with expertise in banking, personal finance and funds management.