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Shareholders in Mallinckrodt, the Dublin-based but US-run drugmaker in the middle of a bankruptcy reorganisation, are being urged by a leading corporate advisory firm to vote against some directors as a parting rebuke over its handling of the US opioid crisis and executive pay.
Mallinckrodt filed for bankruptcy in Delaware last October as the company was overwhelmed by lawsuits accusing it of deceptively marketing opioids.
The company is pursuing a US court-supervised Chapter 11 reorganisation that would set up a $1.6 billion trust to resolve opioid-related claims with states, local governments and private individuals.
The plan, supported by certain creditors and subject to broader votes by early September, would see unsecured bondholders take control of the company, some $1.3 billion of debt being eliminated and general unsecured creditors split $150 million in cash.
Existing shareholders are set to be wiped out by the debt restructuring.
Glass Lewis, an influential shareholder advisory firm on corporate governance, said it recognises Mallinckrodt’s actions in recent years to respond to the opioid epidemic, with its website providing information about its role in addressing opioid abuse and misuse.

Oversight role
“However, question whether the board has properly exercised its regulatory oversight role in the years preceding the US government’s crackdown vis-à-vis the deceptive marketing schemes of opiate manufactures,” Glass Lewis said. “This concern is amplified by the relatively limited refreshment that the board has effected since such issues became a matter of global interest in 2017.”
As such, Glass Lewis is calling on investors to vote against the re-election of board members Martin Carroll and Kneeland Youngblood at the group’s annual general meeting in Dublin next month. Both have been members of Mallinckrodt committees covering governance and compliance since the company floated in New York in 2013.
Almost 500,000 people died from overdoses involving opioids, including prescription and illicit drugs, in the US in the 20 years to 2019, according to figures from the US Centres for Disease Control and Prevention. Mallinckrodt was the third opioid maker to seek Chapter 11 bankruptcy protection.
“The company’s legal issues, bankruptcy and loss of exchange-trading status have had a significant negative impact on shareholder value and the company’s reputation,” Glass Lewis said.
Discontent
“While it is likely that the board will be reconstituted upon the company’s emergence from bankruptcy, we believe that there is sufficient grounds for shareholders to signal their discontent this year by voting against the aforementioned directors at the annual meeting.”
Glass Lewis has also urged shareholders to vote against the re-election of directors David Carlucci, Mr Carroll, David Norton and Anne Whitaker, all members of Mallinckrodt’s human resources and compensation committee, over concerns around executive pay practices.
A spokesman for Mallinckrodt declined to comment on the Glass Lewis report.
The Irish Times reported last week that a stand-off between Mallinckrodt and a small group of dissident shareholders, claiming their rights are being suppressed during the debt reorganisation, is on track to be aired before the High Court in Dublin later this year.
New York-based asset-management firm Buxton Helmsley, which is leading a group of investors that own about 5.6 per cent of Mallinckrodt, has claimed that it has been thwarted by Mallinckrodt and the Delaware court as it sought a seat at the debt negotiation table.
Mallinckrodt successfully filed an objection in late 2020 against the formation of an official committee for existing shareholders, and also secured an order from the Delaware court in April which effectively bans Buxton Helmsley, led by Alexander Parker, from taking a number of actions.
These include using its shares to call an extraordinary general meeting, put forward resolutions at the upcoming agm, or taking legal action without the US court’s approval.
However, Mr Parker has said he plans to raise his issues before the Irish High Court when the drugmaker files for examinership to rubber-stamp the restructuring.