Elan's decision to enhance the severance package of chief executive Kelly Martin in the event of a change in control at the firm has run into opposition from corporate governance group Manifest.
The British corporate governance specialists ask whether Mr Martin is effectively being incentivised to sell the company. It notes that, at last Friday's share price, Mr Martin would have secured more than $13 million (€10.6 million) in the event of a takeover leading to a loss of position, including more than $8 million from the exercise of share options.
Elan last week filed notice of Mr Martin's enhanced conditions with the US Securities and Exchange Commission (SEC). They increase his severance in the event of a takeover at the company to three years' salary and bonus from two years previously.
Manifest also accuses the company, which is headquartered in Ireland but operates largely out of the US, of not treating shareholders equally.
The company said it had "concerns over the company's approach to disclosure, given that it appears to have treated holders of its American Depositary Receipts (ADRs) differently from those UK and Ireland holders of ordinary shares".
"The announcement concerning the change to the CEO's termination payment could be viewed by some shareholders as providing the CEO with an additional incentive to work towards the sale of the company, and thus be potentially price sensitive."
Market sources in Dublin said the decision to notify the SEC and not the Irish Stock Exchange was down to the differing requirements of the two jurisdictions.
They noted that the terms of Mr Martin's original contract were not disclosed through the Irish exchange but were filed with the SEC. Manifest also said the "termination provisions [ of Mr Martin's new contract] fly against established best practice".
The Irish Association of Investment Managers (IAIM) has also queried the decision and called on the directors behind it to explain the move to shareholders.
IAIM secretary general Ann Fitzgerald said last night that the members of Elan's remuneration committee should explain to shareholders "why they have done what they have done".
Ms Fitzgerald said Mr Martin's enhanced package was a "very peculiar one" both because it was very generous and "because of the way it follows media speculation regarding a potential takeover of the company".
However, analysts in Dublin said Mr Martin was more likely to be judged on his ability to bring Elan's key multiple sclerosis drug, Tysabri, back to market than any concern about his remuneration package.
Tysabri was suspended after two trials patients contracted a generally fatal neurological condition.
