SEOUL, South Korea, June 7, 2024 /PRNewswire/ --
Dear Fellow Shareholders,
ILJIN SNT Co., Ltd. ("ILJIN") is a long-standing investor of Aurinia Pharmaceuticals Inc. ("Aurinia" or the "Company"), and, together with its affiliates, currently holds more than 5% of Aurinia's common stock.
As one of the Company's largest and longest-standing shareholders, ILJIN would like to share its views regarding the Company's issuance of excessive amounts of RSUs to its executives and Board members. No doubt this is against the wishes of many Aurinia shareholders concerned about the Company's future.
As you know, Company management recently revised its proposed amendment to the "Equity Incentive Plan" in Proposal 4 of the Proxy Statement/Circular, so now the number of new "Plan Shares" is reduced to 8,500,000 shares from the previous 11,375,000 shares. As we indicated in our previous letters to fellow shareholders, ILJIN has grave concerns about the Company's Equity Incentive Plan. In short, to ILJIN, the stock award plan does not appear to function effectively as an incentive plan -- but rather operates as a share give-away plan that enriches Board members and Company executives at the expense of substantial share dilution on the part of existing Aurinia shareholders.
The Company has been awarding a massive number of RSUs (which, unlike stock options, are stock grants with zero cost to the recipients) to its Board members and executives during the past several years. For example, the Company awarded Mr. Peter Greenleaf a total of 1,550,000 RSUs between 2022 and 2024, and the RSUs will be vesting fully during the period of 2023-2027. Once the RSUs are fully vested, Mr. Greenleaf will acquire 1.55 million Aurinia shares without the requirement that any additional performance milestones be met. Given the significant number of free shares involved, and vesting period running through 2027 we doubt whether Mr. Greenleaf had a genuine motivation to successfully conclude the Company's Strategic Review in 2023-2024.
On top of the aggregate 1.55 million RSU grant, Mr. Greenleaf is also set to receive an additional 350,000 shares upon the vesting of Performance Awards. As a result, Mr. Greenleaf may acquire up to a total of 1.9 million shares during the period of 2023-2027. Meanwhile, while Mr. Greenleaf receives substantial equity compensation, the Company's shareholders have witnessed a shareholder value destruction by more than 50% during the past 3 years. To ILJIN, these Board members and Company executives appear to have been using the Company's "Equity Incentive Plan" -to gain substantial and excessive equity awards without being required to meet any effective performance milestones.
Needless to say, ILJIN believes the ineffective administration of the "Equity Incentive Plan" is a result of the Board's lack of the ability and willingness to aggressively exercise oversight of management performance. ILJIN believes these Board members have failed to properly enforce management accountability while also they have been also rubber stamping all these exorbitant stock incentive plans to the detriment of significant share dilution. The Board members should have instead ensured that Peter Greenleaf and others in management and on the Board "earn" these shares.
For these reasons, ILJIN will vote against the Company's compensation plan as proposed or amended in the Proxy Statement/Circular, and will withhold support for Peter Greenleaf and certain other Board members.
ILJIN believes it is time to send an unequivocal message that the Company's management and Board must be changed, and that from now on, they all should be held accountable for their performance as the Company's executives and Board members. Otherwise, ILJIN believes the destruction of shareholder value may continue while stock awards continue to be granted without any meaningful oversight by the Board. ILJIN intends to send this message with its vote at the upcoming AGM.
Sincerely,
KH Sung
CEO of ILJIN SNT Co., Ltd.
CONTACT: Yoonhwa Lee, yoonhwa.lee@iljin.co.kr
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