Walgreens exec: Obama made us 'whipping boy' of tax inversions

CHICAGO — Walgreens Chairman James Skinner suggested Thursday that the pharmaceutical behemoth became the Obama administration's "whipping boy" when the company considered moving its headquarters overseas last year as it merged with Switzerland-based Alliance Boots.

The nation's biggest pharmaceutical chain faced fierce scrutiny when it became the most iconic American brand to consider a maneuver, known as a tax inversion, in which an American company buys an international company and then moves its headquarters overseas to cut its corporate tax rate.

Skinner, who made his comments at the first annual shareholders meeting of the Walgreens Boots Alliance, said that the company intends to remain headquartered in the U.S. Yet, he criticized the administration and others for the pressure that was placed on the company.

"The Obama administration and treasurer (Treasury Secretary Jack Lew) were taking the opportunity to select any company that was even thinking about inverting and using them as a whipping boy relative to the issue to sort of further their agenda," Skinner said. "They took the license to, and everyone who wanted to make hay of the situation regarding their agenda politically started taking public relations shots, talking about the inversion."

Obama accused companies employing tax inversions of "gaming the system" last year in the midst of more than a dozen U.S. firms either shifting or considering shifting their headquarters overseas. Several major U.S. companies — including AbbVie, Medtronic and Mylan — shifted their headquarters to lower their tax rates. But none had as high a profile as Walgreens, which has long touted itself with the folksy motto "the pharmacy America trusts."

Skinner said the board of directors never even took a vote on the issue, but said that an inversion may have been beneficial for the chain, which has roughly 8,300 pharmacies in the United States.

"The inversion itself would have not affected 200,000-plus Americans who work in America," he said. "If anything, it could be beneficial to them because of the investments we might be able to make. The fact, though, is that the business purpose of the inversion was never consummated. We did not have the right environment for an inversion."

Walgreens shareholders also voted down a proposal on Thursday to make it easier to nominate directors to the board of the nation's biggest pharmaceutical chain.

The push, which was opposed by the company, was spearheaded by CtW Investment Group, an arm of the labor federation Change to Win, which had pressed unsuccessfully for the rule change last year. Under the proposal, long-term investors could potentially nominate up to a fifth of the board.

CtW officials said that the move was particularly salient because the company is undergoing a major transformation and has already granted board representation to the activist hedge fund JANA Partners, which holds roughly 1.5% of shares.

"Proxy access would also provide long-term investors with a critical safety valve as the company undergoes a major post-acquisition transformation, which puts accountability at a premium," said Derrick Wortes, an equity research analyst for CtW. "This is particularly important at a moment when execution of the company's leadership transition has stuttered and raised questions about the future governance of the company."

The unsuccessful push by the unions comes a week after a similar proposal passed during last week's McDonald's annual shareholders meeting despite deep opposition from the fast-food franchise.

Investor support for such new director nomination rules, known as "proxy access," is growing.

In addition to McDonald's, proxy access has been approved in recent weeks by Avon, Citibank and Kohl's. Meanwhile, pushes for proxy access at Apple, Coke and Exelon have failed in recent weeks.

Skinner said that Walgreens remains open to proxy access in the future, but he did not agree with the latest shareholder proposal. The company said it was concerned that the proposal would increase the influence of special interests.

"We will continue to review this," Skinner said. "We are supportive of proxy access, but not for this particular proposal. We simply didn't believe this proposal was the right proposal for proxy access."

Walgreens officials also suggested they are no closer to picking a permanent CEO to replace Gregory Wasson, who left the company as the merger was being completed late last year. Stefano Pessina, who had been executive chairman of Alliance Boots, was named as the company's acting CEO upon Wasson's retirement.

"We need to make sure we are making the right choice," Pessina said.

The company's shares moved slightly lower on Thursday, closing at $86.05, down 0.2%.