UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.  )

 

 

 

A shareholder of record is entitled to appoint one or more proxies in relation to the Annual Meeting (provided that each proxy is appointed to exercise the rights attached to different shares). Such proxy need not be a shareholder of record of Royalty Pharma plc but must attend the Annual Meeting and vote as instructed by or on behalf of the shareholder of record for such vote to be counted. The proxy may exercise a shareholder’s right to attend the meeting, ask questions and vote at the Annual Meeting.

Please refer to the section “General Information” of the Proxy Statement for further information and full details on how to attend and vote (or appoint a proxy to do so on your behalf) at the Annual Meeting.

This Notice of Annual General Meeting of Shareholders and related proxy materials are being distributed or made available to shareholders beginning on or about April 25, 2024 at www.proxyvote.com.

During the Annual Meeting, our Board (or the chair of the Annual Meeting) will present to our shareholders our U.K. statutory accounts together with our U.K. statutory reports, including the strategic report, the directors’ report, the directors’ remuneration report and the independent auditor’s report for the fiscal year ended December 31, 2023 (our “U.K. Annual Report and Accounts”).

The proxy materials include this notice, the Proxy Statement, our Annual Report on Form 10-K, U.K. Annual Report and Accounts and the enclosed proxy card. The Proxy Statement provides information about the agenda and related matters for the Annual Meeting. It also describes how our Board operates, includes information about its director candidates, and includes information about the other items of business to be conducted at the Annual Meeting.

If you attend the Annual Meeting, you will be asked to present valid picture identification before being admitted along with proof of share ownership (or a proxy from the record holder). Cameras, recording devices and other electronic devices will not be permitted. The Annual Meeting may not be recorded.

If it is determined that a change in the date, time or location of the Annual Meeting is advisable or required, an announcement of such changes will be made through a press release, additional proxy materials filed with the U.S. Securities and Exchange Commission (the “SEC”), and on the Investors section of our website. Please check this website in advance of the meeting date if you are planning to attend in person.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit your proxy through the internet or by telephone or request and submit your proxy card as soon as possible, so that your shares may be represented at the meeting.

By Order of the Board,

George Lloyd

Executive Vice President, Investments & Chief Legal Officer

 

Forward-Looking Statements and Non-GAAP Measures

This Proxy Statement contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “target,” “forecast,” “guidance,” “goal,” “predicts,” “project,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective assets, our industry, our beliefs and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. You should evaluate all forward-looking statements made in this Proxy Statement in the context of the numerous risks outlined in Part I under Item 1A. under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and as updated by our Quarterly Reports on Form 10-Q along with other public filings we make with the SEC. We undertake no duty to update any of these forward-looking statements in this Proxy Statement, except as otherwise required by law.

This Proxy Statement includes certain non-GAAP liquidity measures as defined under Item 10(e) of Regulation S-K. We believe such measures provide meaningful information about our liquidity, together with a reconciliation of those measures, to the most directly comparable U.S. GAAP measures.

WEBSITE LINKS

The content in any website links included in this Proxy Statement is not incorporated herein and does not constitute a part of this Proxy Statement.

Performance Highlights

Financial and strategic highlights for 2023 include:

Our 2023 performance showcases our capabilities and how we create long-term value for our people, community and shareholders.

Our Director Nominees

The following table provides summary information about each director nominee, and the expected composition of each Board committee following the Annual Meeting, assuming each director nominee is elected. All of the director nominees are currently members of the Board and have been directors of Royalty Pharma plc since 2020, with the exception of Mr. Hodgson, who was first elected as a director at the 2022 Annual Meeting. Mr. Giuliani and Mr. Riggs will not seek re-election to the Board and, accordingly, their Board service will end in June.

Board Composition

The Board believes that it is essential for its membership to represent a wide range of experiences, skills and perspectives in order to enhance the Board’s effectiveness in fulfilling its oversight role. As such, the Board is committed to increasing the diversity of its membership. Below we highlight the composition of our director nominees.

 

We are committed to continuously enhancing our disclosures about Board diversity in response to feedback from shareholders and other stakeholders. The table below provides certain highlights of the composition of our Board members and nominees as of April 25, 2024 based on each director’s self-identification. To see our Board Diversity Matrix as of April 27, 2023, please see the proxy statement filed with the SEC on April 27, 2023. Each of the categories listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f).

Board Skills and Experience

The table below summarizes key qualifications, skills, or attributes most relevant to the decision to nominate the director to serve on the Board. A mark indicates a specific area of focus or expertise on which the Board relies most. The lack of a mark does not mean the director does not possess that qualification or skill. Each director biography below describes these qualifications and relevant experience in more detail. We believe the table below demonstrates the breadth and diversity of the collective experience, expertise, and skills of our Board.

Our Strategy

We intend to grow our business by continuing to partner with constituents across the biopharmaceutical value chain to fund innovation. Our growth strategy is tailored to the needs of our partners through a variety of structures:

Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.

Our Points of Differentiation

We have established a number of significant points of differentiation that will enable us to further advance our leadership position and our status as a royalty financing partner of choice to the biopharmaceutical ecosystem:

Corporate Responsibility Highlights

We believe that our corporate responsibility strategy, policies and practices will create sustainable long-term value for Royalty Pharma and its employees, shareholders and other stakeholders, while also helping us reduce risk and identify new opportunities.

Highlights of our corporate responsibility efforts include:

To foster these principles, we have committed to promote an inclusive culture, including through our commitment to numerous social impact initiatives, employee development and comprehensive benefits. See “Corporate Responsibility at Royalty Pharma” for more detail on our culture and these commitments and initiatives. In addition, corporate responsibility topics are top priorities of our management and Board, with primary oversight of corporate responsibility by the Nominating and Corporate Governance Committee with regular Board review.

Compensation Philosophy and Highlights

We are externally managed and have no personnel of our own. The Manager manages our business and assets and sources and evaluates new investment opportunities. The Management Agreement was approved by our Board, has a fixed term and may only be terminated for cause. Please refer to the section entitled “Certain Relationships and Related Party Transactions—Management Agreement.” The Manager employs a team of experienced management personnel, as detailed in “Executive Officers.”

Under the Management Agreement, the Manager is paid a management fee based on a fixed percentage equal to 6.5% of the cash receipts from Royalty Investments (as defined in the Management Agreement) or Portfolio Receipts for such quarter and 0.25% of the value of our security investments under GAAP as of the end of such quarter. The Manager pays the compensation of our executive officers.

Because we are externally managed and have no employees of our own, our Management Development and Compensation Committee is not responsible for designing the executive compensation program for our executive officers. Instead, our Management Development and Compensation Committee reviews the performance of the Manager under the Management Agreement. However, our Manager strives to create an executive compensation program that balances the goals of attracting, motivating, rewarding and retaining our executive officers, including our named executive officers, with the goal of promoting the interests of our shareholders over the long-term. Our Manager’s executive compensation policies and practices include:

The annual compensation of our named executive officers for our year ended December 31, 2023, other than Mr. Legorreta, includes three principal elements: base salary, annual bonus and Equity Performance Awards. Please refer to the “Compensation Discussion and Analysis” section of this Proxy Statement for a full description of our Manager’s compensation philosophy, policies and practices.

Governance and Board Best Practices

We accelerate innovation in life sciences by making the R&D ecosystem more productive — a mission that can only be accomplished with a broad, long-term focus. We believe our adoption of leading governance practices will foster sustainable business success over the long term. Strong corporate governance, informed by participation from our shareholders, is essential to achieving our goals. In 2023, the Board, led by the Audit Committee, undertook a comprehensive review of the Company’s Policy Restricting Pledging and management met with ISS Corporate Solutions (ISS) to better understand their position on pledging. Based upon this review, we made several governance enhancements, including strengthening our Insider Trading policy, which resulted in a reduction in the number of shares pledged by directors and executive officers from 78,450,885 shares to 17,519,639 shares, which is equivalent to a reduction in the number of shares pledged from 43.9 days of average daily trading volume at the time of our 2023 Annual Meeting to 6.6 days of average daily trading volume as of the Record Date for our 2024 Annual Meeting.

In 2023, members of management also continued their robust shareholder outreach efforts. Additional information can be found under “Shareholder Engagement” below.

Independent, Effective Board Oversight

Shareholder Rights

Voting Matters

Certain proposals on which shareholders are being asked to vote are customary, or required for public limited companies incorporated in England and Wales to present to shareholders at each annual general meeting. These proposals may be unfamiliar to shareholders accustomed to proxy statements for companies organized in other jurisdictions. Specifically, proposals 4 through 10 are customary proposals, and may be mandated by English law.

Resolutions in proposals 1 through 9 will be proposed during the Annual Meeting as ordinary resolutions, which means that, assuming a quorum is present, each such resolution will be approved if a simple majority of votes cast (whether in person or by proxy) for or against a resolution are cast in favor of the resolution. Proposal 10 will be proposed as a special resolution and requires the affirmative vote of at least 75% of the shares present in person or represented by proxy at the Annual Meeting and actually cast on Proposal 10.

Further details of the proposals are set out in the Proxy Statement under the relevant descriptions of the proposals.

With respect to the non-binding advisory votes in proposals 2 and 6, the result of the vote for each proposal will not require our Board to take any action. Our Board values the opinions of our shareholders as expressed through advisory votes and other communications. Our Board will carefully consider the outcome of the advisory vote on each proposal.

Proposal 1. Each of the proposed directors will be elected if a simple majority of votes cast at the Annual Meeting (whether in person or by proxy) for or against a resolution are cast in favor of the proposed election. This means that each of the director nominees must receive the simple majority of votes cast (whether in person or by proxy) for that director nominee to be elected to our Board. You may vote “FOR,” “AGAINST” or “ABSTAIN” for each director nominee. If you “ABSTAIN,” your voting rights will be counted for purposes of establishing a quorum, but will not be taken into account in determining the outcome of the proposal. This proposal is considered a non-routine matter, so if you are a street name shareholder, your broker, bank, or other nominee is not permitted to vote your shares on this proposal without your instruction (a “Broker Non-Vote”). Broker Non-Votes are not treated as entitled to cast a vote and, therefore, will have no impact on the proposal.

Proposals 2, 4, 5, 6, 8 and 9. Each proposal will be approved if a simple majority of votes cast at the Annual Meeting (whether in person or by proxy) for or against a resolution are cast in favor of the resolution. You may vote “FOR,” “AGAINST” or “ABSTAIN” on each of these proposals. If you “ABSTAIN,” your voting rights will be counted for purposes of establishing a quorum, but will not be taken into account in determining the outcome of the proposal. Broker Non-Votes are not treated as entitled to cast a vote and, therefore, will have no impact on the proposals.

Proposals 3 and 7. Each proposal will be approved if a simple majority of votes cast at the Annual Meeting (whether in person or by proxy) for or against a resolution are cast in favor of the resolution. You may vote “FOR,” “AGAINST” or “ABSTAIN” on each of these proposals. If you “ABSTAIN,” your voting rights will be counted for purposes of establishing a quorum, but will not be taken into account in determining the outcome of the proposal. These proposals are considered “routine” matters, so if you are a street name shareholder, your broker, bank, or other nominee has the discretion to vote your shares on each of these proposals even if your broker does not receive voting instructions from you.

Our Director Nominees

Director Nominees

The Board recommends that shareholders vote “FOR” the election of each of the director nominees.

 

Recommendation and Required Vote

For a director nominee to be elected, a simple majority of votes cast (whether in person or by proxy) at the Annual Meeting must be cast in favor of the director nominee’s election. Separate resolutions for the election of each nominee will be submitted for shareholder vote at the Annual Meeting. Our Board believes that the election of each director nominee is advisable and in the best interests of Royalty Pharma and our shareholders.

CORPORATE GOVERNANCE

The Board is committed to continually improving its corporate governance processes, practices and procedures. Our governance policies and structures are designed to promote the Board’s thoughtful oversight of Royalty Pharma and ensure intelligent risk-taking, with the goal of furthering our long-term strategic goals. Highlights include:

Corporate Governance Guidelines

Royalty Pharma has adopted a set of Corporate Governance Guidelines which are available on our website at www.royaltypharma.com, under “Investors—Corporate governance.” Among the topics addressed in our Corporate Governance Guidelines are:

Limits on Director Service on Other Boards

We have a highly effective and engaged Board, and we believe that our directors’ outside directorships enable them to contribute valuable knowledge and experience to the Board. Nonetheless, the Board is sensitive to the external obligations of its directors and the potential for overboarding to compromise the ability of these directors to effectively serve on the Board. Unless otherwise approved by the Nominating and Corporate Governance Committee, our Corporate Governance Guidelines limit each director’s service on other boards of public companies to a number that permits them, given their individual circumstances, to responsibly perform all director duties and, unless an exception is granted, this service may not exceed three other public company boards for directors not serving as an executive officer of a

public company and one other public company for a director serving as an executive officer of a public company. Further, the ability of each director to devote sufficient time and attention to director duties is expressly considered as part of the annual Board and committee evaluation process, which aims to evaluate the effectiveness and engagement of Royalty Pharma’s directors, including in the context of their external commitments.

While the Board considers its directors’ outside directorships during this evaluation process, the Board recognizes that this is one of many outside obligations which could potentially impair a director’s capacity to dedicate sufficient time and focus to their service on the Board. As such, the Board evaluates many factors when assessing the effectiveness and active involvement of each director. Such other factors include:

Therefore, on a case-by-case basis, it may be appropriate for the Board to impose further restrictions on outside board service or waive this requirement as to any director if it deems a waiver to be in the best interests of Royalty Pharma and our shareholders.

We schedule our Board and committee meetings two years in advance to ensure director availability and maximum participation. Directors serve for one-year terms; accordingly, there is an opportunity to evaluate annually each director’s ability to serve, which is further discussed in the “Annual Board and Committee Evaluations” section below.

Code of Business Conduct and Ethics

We have adopted a written Code of Business Conduct and Ethics that applies to all employees, officers and directors, including those officers responsible for financial reporting. The Code of Business Conduct and Ethics is available on our website at www.royaltypharma.com, under “Investors—Corporate governance.” If we make any substantive amendments to the Code of Business Conduct and Ethics or grant any waivers from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

Political Activity and Spending

We recognize the importance of the political process and policy arena in supporting our mission to accelerate innovations in the life sciences through collaboration with innovators to make the research and development ecosystem more productive. However, we did not engage in any lobbying or political activities in 2023. In accordance with English company law, political donations are subject to prior authorization by a resolution of our shareholders. We have not made political donations or incurred any political expenditures in 2023. In addition, we have not made any contributions to any political party during 2023.

Director Independence

The listing rules of the Nasdaq generally require that a majority of the members of a listed company’s board of directors be independent. In addition, the listing rules generally require that, subject to specified exceptions, all members of our Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees be independent.

In addition, Audit Committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not during the past three years, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries.

Based on the review and recommendation by the Nominating and Corporate Governance Committee, the Board analyzed the independence of each director and nominee. In its most recent review, our Board determined that Bonnie Bassler, Errol De Souza, Catherine Engelbert, Henry Fernandez, M. Germano Giuliani, David Hodgson, Ted Love, Gregory Norden and Rory Riggs are “independent directors” as defined under the applicable rules, regulations, and listing standards of Nasdaq and the applicable rules and regulations promulgated by the SEC. Our Board has also determined that all members of our Audit Committee, Management Development and Compensation Committee and Nominating and Corporate Governance Committee are independent and satisfy the relevant SEC and Nasdaq independence requirements for such committees.

Board Leadership Structure

Our Board and Nominating and Corporate Governance Committee review and evaluate the Board’s leadership structure on at least an annual basis. Mr. Legorreta serves as both Royalty Pharma’s Chief Executive Officer and Chairman of the Board, which the Board has determined is the most appropriate and effective leadership structure for the Board and Royalty Pharma. Mr. Legorreta founded Royalty Pharma in 1996 and, as such, brings over 25 years of strategic leadership experience and an unparalleled knowledge of Royalty Pharma’s business, operations and risks to his role as Chairman of the Board.

The Board does not have a policy on whether the roles of the Chairman and Chief Executive Officer should be separated but believes the current combination of the two roles provides Royalty Pharma with a clear and effective leadership structure to drive Royalty Pharma’s business and communicate its long-term strategy to its stakeholders. The Board also believes this structure allows for robust and frequent communication between the Board’s independent directors and management, enabling the Board to gain a deeper understanding of Royalty Pharma and work with management to enhance shareholder value.

The Lead Independent Director will then be appointed by Royalty Pharma’s independent directors and serve until a successor is duly appointed and qualified, his or her removal or resignation, or he or she is no longer an independent member of the Board.

The Board believes the role and responsibilities of the Lead Independent Director help to ensure the exercise of independent judgment by the Board and further facilitate coordination with the independent directors.

Role of Lead Independent Director

The independent directors of our Board have appointed Henry Fernandez as our Lead Independent Director. In this role, Mr. Fernandez:

Mr. Fernandez has substantial experience with corporate governance and public company management, as well as deep knowledge of Royalty Pharma and its governance practices. The Board believes Mr. Fernandez’s experience enables him to provide a valuable perspective on Royalty Pharma’s growing business and risk management and enhances his ability to challenge members of senior management.

The Board commended Mr. Fernandez’s strength as Lead Independent Director, highlighting his leadership and the effectiveness with which he acts as a liaison between the Board and management.

Executive Sessions

Executive sessions of independent directors are generally held at regularly scheduled Board meetings, and four executive sessions were held in 2023. Each session is chaired by the Lead Independent Director, who facilitates discussion of various topics throughout the year, including Royalty Pharma’s strategy, key governance issues (including succession planning) and the performance of senior executives.

Robust Director and Executive Share Ownership and Guidelines

We encourage directors and executive officers to own our shares. Our executive officers own 16.4% and, directors and related entities own an additional 14.2%, for a total of 30.6% of our ordinary shares. We believe this insider ownership exceeds that of over 95% of the companies in the S&P 500, and creates the strong alignment between shareholders and our executive officers, directors and their related entities. In order to complement our compensation programs and further align the interests of our directors and our named executive officers with those of our shareholders, our Board adopted Director Share Ownership Guidelines and Executive Share Ownership Guidelines pursuant to which the following persons are expected to own equity in Royalty Pharma with the following aggregate market values:

Our independent directors and our named executive officers are expected to attain compliance with these ownership guidelines by the fifth anniversary of the later of our IPO or their first appointment or election, in the case of an independent director, or their hire or promotion date, in the case of a named executive officer. Thereafter, independent directors and named executive officers are required to certify their compliance with these ownership guidelines at least once each year. As of December 31, 2023, each of our independent directors and named executive officers were either in compliance with the share ownership guidelines or on track to be in compliance within the applicable time-period.

Named Executive Officer’s Agreement to Retain and Not Sell at least 50% of Shares for Five Years After IPO

In connection with our IPO in February 2020, our named executive officers as described in the “Compensation Discussion and Analysis” section agreed to retain and not sell for five years after our IPO at least 50% of the ordinary shares they owned at the time of the IPO. The number and percentage of the ordinary shares currently owned by our named executive officers that they have agreed to retain and not sell through February 2025 as of December 31, 2023 is as shown below.

Hedging and Speculative Trading Prohibited

We have adopted, as part of our insider trading policy, a policy prohibiting our directors and officers and employees of the Manager from hedging transactions or similar arrangements with respect to our securities that are designed to hedge or speculate on any change in the market value of our securities. This policy was established to avoid the appearance of improper or inappropriate conduct.

In addition, all our directors and officers and employees of the Manager are prohibited from engaging in short sales of our securities. Further, such individuals are prohibited from buying or selling puts or calls or other derivative securities on our securities.

Policy Restricting Pledging

In 2023, the Board, led by the Audit Committee, undertook a comprehensive review of the Company’s Policy Restricting Pledging as a result of feedback from our shareholders and in light of the position of ISS, which is that pledges of shares by directors or executive officers can pose a risk to the investments of outside shareholders. The Board and management from time to time seek input from our investors when considering important corporate actions, including ways to align our corporate governance with shareholder interests. As a result, we have adopted enhancements to our Policy Restricting Pledging which resulted in a reduction in the number of shares pledged by directors and executive officers from 78,450,885 shares to 17,519,639 shares, which is equivalent to a reduction in the number of shares pledged from 43.9 days of average daily trading volume at the time of our 2023 Annual Meeting to 6.6 days of average daily trading volume as of the Record Date for our 2024 Annual Meeting.

Our Board believes that the promotion of long-termism and an ownership culture aligns the interests of our directors and executive officers with those of our shareholders. While pledging shares as collateral for personal loans can create risks, including the risk of a forced sale of our Class A ordinary shares, at the same time:

As such, the Board believes that the unusual degree of alignment between public shareholders and our directors and executive officers resulting from their substantial share ownership, and the commitment of our executive officers to retain and not sell for five years after our IPO at least 50% of the shares they owned at the time of the IPO is a unique characteristic of Royalty Pharma that the Board wishes to encourage. After careful consideration, the Board has therefore designed the Policy Restricting Pledging, which has been further enhanced in 2023, to balance these concerns and mitigate risk to Royalty Pharma and our shareholders.

In order to reduce the risk of forced sales of pledged shares following a decline in the market price of our Class A ordinary shares, our Policy Restricting Pledging limits the amount of debt that can be secured by the pledge of our shares and the number of trading days any pledged position would take to “unwind.” While we already had a Policy Restricting Pledging, the Audit Committee concluded that a stronger prohibition on pledging was appropriate. Pursuant to our Policy Restricting Pledging:

The Policy Restricting Pledging requires the Audit Committee to review all pledging arrangements, assess any risks to Royalty Pharma and its shareholders and report on the arrangements and risks to the Board. This policy provides that all pledges must comply with, and be precleared under, Royalty Pharma’s Insider Trading Policy. The Audit Committee may seek outside advice in connection with its oversight of pledging arrangements.

In order to monitor the risk associated with loans secured by shares, the Audit Committee of the Board receives reports from the Manager at least quarterly regarding pledging arrangements. In accordance with the Policy Restricting Pledging, the Audit Committee shall weigh some or all of the following factors when reviewing pledging arrangements:

After examining these factors, the Audit Committee was satisfied that this monitoring is effective and confirmed that our directors and executive officers who have pledged shares are and have been compliant with this policy, except for one director who has been granted a partial waiver of this policy. The Audit Committee considered it reasonable to grant this waiver given that this director had previously been in compliance with our prior Policy Restricting Pledging and needed additional time to bring himself into compliance with our new Policy Restricting Pledging. The Audit Committee expects that all directors and executive officers will be in compliance with the Policy Restricting Pledging after the Annual Meeting. The Audit Committee will continue to monitor pledging arrangements and encourage all directors and executive officers to comply with the Policy Restricting Pledging.

See “Security Ownership of Certain Beneficial Owners” for information regarding shares pledged by our directors and executive officers as of the Record Date. Note that such disclosure reports the total number of shares pledged. However, the actual amount of borrowings against such securities as of such date is subject to the limitations described above.

Committees of our Board

Our Board has established an Audit Committee, a Management Development and Compensation Committee, and a Nominating and Corporate Governance Committee. Our Board has adopted a written charter for each committee setting forth the roles and responsibilities of each committee. The Board and each committee may, from time-to-time, form and delegate authority to subcommittees when appropriate. The expected composition of each Board committee following the Annual Meeting, assuming each director nominee is elected, and responsibilities of each committee are described below.

Each of these committees has a written charter approved by our Board. Copies of the charters for each committee are available, without charge, upon request in writing to Royalty Pharma plc, 110 East 59^th Street, New York, New York 10022, Attn: Investor Relations, or in the “Investors” section of our website, which is located at www.royaltypharma.com, under the heading “Corporate Governance.” Directors serve on these committees until their resignations or until otherwise determined by our Board.

Board and Committee Meetings and Attendance

Our Board and its committees meet regularly throughout the year and act by written consent from time to time. During 2023, our Board met nine times, the Audit Committee met six times, the Management Development and Compensation Committee met four times, and the Nominating and Corporate Governance Committee met four times. During 2023, each member of our Board attended at least 75% of the aggregate of all meetings of our Board and of all meetings of committees of our Board on which such member served that were held during the period in which such director served.

Board Attendance at Annual Meeting

Our policy is to invite and encourage each director on our Board to be present at our Annual Meeting. Each director on our Board attended our 2023 Annual Meeting held on June 22, 2023.

Director Nominations Process

The Nominating and Corporate Governance Committee is responsible for recommending candidates to serve on the Board and its committees. In considering whether to recommend any particular candidate to serve on the Board or its committees or for inclusion in the Board’s slate of recommended director nominees for election at the Annual Meeting, the Nominating and Corporate Governance Committee considers the criteria set forth in our Corporate Governance Guidelines.

Specifically, the Nominating and Corporate Governance Committee may take into account many factors, including: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company; experience as a board member of another publicly held company; professional and academic experience relevant to the biopharmaceutical industry; leadership skills; experience in finance, accounting and compensation practices; and diversity of background and perspective, including, but not limited to, with respect to race, ethnicity, gender, geography, sexual orientation, age, nationality, religious beliefs, socio-economic status, physical and/or mental capabilities. In determining whether to recommend a director for reelection, the Nominating and Corporate Governance Committee may also consider the director’s past attendance at meetings and participation in and contributions to the activities of the Board.

We are committed to actively seeking out highly qualified diverse individuals to include in the pool from which new director candidates are chosen. The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of experience in these various areas. The Board recognizes the value of diversity and thus has included diversity of background and perspective, including, but not limited to, with respect to race, ethnicity, gender, geography, sexual orientation, age, nationality, religious beliefs, socio-economic status, physical and/or mental capabilities, as factors that will be taken into consideration by the Nominating and Corporate Governance Committee when evaluating the suitability of, and recommending, candidates for election by shareholders, and by the Board in approving such candidates.

In identifying prospective director candidates, the Nominating and Corporate Governance Committee may seek referrals from other members of the Board, management, shareholders and other sources, including third party recommendations. The Nominating and Corporate Governance Committee also may, but need not, retain a search firm in order to assist it in identifying candidates to serve as directors of Royalty Pharma. The Nominating and Corporate Governance Committee uses the same criteria for evaluating candidates regardless of the source of the referral or recommendation. When considering director candidates, the Nominating and Corporate Governance Committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent directors, provide a blend of skills and experience to further enhance the Board’s effectiveness. In connection with its annual recommendation of a slate of nominees, the Nominating and Corporate Governance Committee also may assess the contributions of those directors recommended for re-election in the context of the evaluation process and other perceived needs of the Board.

When considering whether the directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Board focused primarily on the information discussed in each of the Board member’s biographical information as included in this Proxy Statement. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. This process resulted in the Board’s nomination of the incumbent directors named in this Proxy Statement and proposed for election by you at the Annual Meeting.

 

Recommendations, Nominations and Shareholder Nominated Director Candidates

The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders, and such candidates will be considered and evaluated under the same criteria described above. Any recommendation submitted to Royalty Pharma should be in writing and should include any supporting material the shareholder considers appropriate in support of that recommendation, but must include information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of

such candidate and a written consent of the candidate to serve as one of our directors if elected and must otherwise comply with the requirements under our Articles of Association for shareholders to recommend director nominees. Shareholders wishing to propose a candidate for consideration may do so by submitting the above information to Computershare Company Secretarial Services Limited at The Pavilions, Bridgwater Road, Bristol, United Kingdom, BS13 8AE. Director nominations by shareholders must meet the timing and other requirements described under the heading “Shareholder Proposals and Director Nominations.”

Shareholder Engagement

We believe that engaging with our shareholders, prospective shareholders and sell-side analysts is the best way to address the issues that matter most to them. Dialogue with these constituencies helps us understand their perspectives on our goals and expectations for performance, as well as identify issues that might affect our long-term strategy, corporate governance and compensation practices. As such, we offer several opportunities to provide feedback to our Board and senior management.

Our Investor Relations team leads year-round outreach efforts with our investors and the investment community. During these engagements, we typically discuss topics such as market trends affecting our industry, the competitive environment, our financial performance and our overall outlook.

We also engaged with shareholders to review and receive feedback on our governance practices and design of our executive compensation program. Topics discussed include:

The feedback we receive from these discussions is carefully considered by the Board, the Nominating and Corporate Governance Committee and the Management Development and Compensation Committee.

Our directors and senior executives recognize the benefits that come from providing our shareholders, prospective shareholders and sell-side analysts with visibility and transparency into our business and knowing their positions on issues that are important to them.

Annual Board and Committee Evaluations

Annual Board Evaluations

The Board conducts an annual evaluation that is intended to determine whether the Board, its committees, and each member of the Board is functioning effectively, and to provide an opportunity to reflect upon, and improve, Board processes and their effectiveness. The evaluations provide each director with an opportunity to assess the effectiveness and performance of the Board, its committees, as well as topics such as Board and committee composition and refreshment; timing, agenda, and content of Board and committee meetings; Board dynamics and function; Board diversity; and executive succession planning. A summary of the results is presented to the Board on an anonymous basis, identifying any themes or issues that have emerged. The Board considers the results and ways in which Board processes and its effectiveness may be improved.

Annual Committee Evaluations

Each committee conducts its own annual evaluation and reports the results to the Board. Each committee’s evaluation includes an assessment of the committee’s compliance with the committee’s charter, as well as ways in which committee processes and effectiveness may be improved.

Annual Evaluation Process

While this formal evaluation process is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round, both inside and outside the boardroom.

Continuing Education and Director Orientation

Continuing education programs enhance the skills and knowledge directors use to perform their responsibilities. Directors participate in internal educational sessions, including briefing sessions on topics that present us with special risks and opportunities, such as product developments and accounting topics.

All new directors participate in a director orientation program that includes briefings by senior management representing key functional areas on topics that include, our strategic plans, capital structure, corporate structure, historical financial performance and key policies and practices, including compliance and trading policies.

Active Committee Rotation

Periodically, the Board approves the rotation of certain directors’ committee memberships. The Board believes that committee rotation is generally desirable to ensure that committees regularly benefit from new perspectives and our directors’ expertise. In 2023, M. Germano Giuliani was appointed to the Nominating and Corporate Governance Committee, David Hodgson was appointed to the Audit Committee and left the Nominating and Corporate Governance Committee, Gregory Norden left the Management Development and Compensation Committee, and Rory Riggs was appointed to the Management Development and Compensation Committee.

Term Limits

The Board seeks to establish appropriate levels of director turnover. While new perspectives and new ideas are critical to an engaged forward-looking and strategic Board, longer-serving directors offer benefits of valuable experience and familiarity. Our Corporate Governance Guidelines provide for term limits for non-employee directors who may serve for no more than 15 years from the date of our IPO unless waived by the Nominating and Corporate Governance Committee.

Age Limits

Under Royalty Pharma’s Corporate Governance Guidelines, a director is required to retire when he or she reaches age 75. A director elected to the Board prior to his or her 75^th birthday may continue to serve until the annual general meeting following his or her 75^th birthday. On the recommendation of the Nominating and Corporate Governance Committee, the Board may waive this requirement as to any director if it deems a waiver to be in the best interests of Royalty Pharma and our shareholders.

Board Oversight of Risk Management

The Board, as a whole, has responsibility for overseeing our risk management process, although the committees of our Board oversee and review risk areas that are particularly relevant to them. The risk oversight responsibility of our Board and its committees is supported by our management reporting processes. Our management reporting processes are designed to provide our Board and our management responsible for risk assessment with visibility into the identification, assessment, and management of critical risks and management’s risk mitigation strategies. These areas of focus include competitive, economic, operational, financial (accounting, credit, investment, liquidity, compensation-related risk and tax), legal, cybersecurity and reputational risks. Our Board reviews strategic and operational risk in the context of discussions, question and answer sessions, and reports from the management at each regular Board meeting, receives reports on committee activities at each regular Board meeting, and evaluates the risks inherent in transactions. Each committee of our Board meets with management and representatives of outside advisors to oversee risks associated with their respective principal areas of focus. We believe this division of responsibilities is an effective approach for addressing the risks we face and that our board leadership structure supports this approach.

Oversight of Technology and Cybersecurity Risk

The Board has adopted a Cyber Security and Personal Data Breach Policy in order to reflect the importance of appropriate security, processes and procedures to the protection of data and assets, and in an effort to establish a foundation for successful protection against cyber-crime and to minimize any potential negative impacts of a successful cyber-attack. Several of our director nominees bring experience with managing and mitigating cybersecurity and technology risks, which provide the Board with insight into such risks and aid in overseeing our information security, operations and systems, as well as our continuing investment in and development of the program. The Board receives updates or training, as necessary, on cybersecurity issues from management, technical experts and legal advisors, as required. The Audit Committee is responsible for overseeing Royalty Pharma’s enterprise risk management program, which includes consideration of technology and cybersecurity risks. The Audit Committee receives updates about the results of assessments conducted by outside advisors who provide independent assessments of our technology systems.

Oversight of Sustainability and Climate Risk

The Board recognizes that climate change is an area of increasing interest to investors as they evaluate which businesses may be impacted as the world evolves into a lower carbon economy. While management does not currently anticipate material capital expenditures arising from environmental regulation, the Board will continue to evaluate our exposure to climate change. The Nominating and Corporate Governance Committee periodically reviews Royalty Pharma’s corporate sustainability program, including through reports from management, which is responsible for overseeing efforts to incorporate sustainability into Royalty Pharma’s business practices, operations and strategy and setting environmental sustainability objectives and strategy for our operations.

Succession Planning and Talent Development

A strategic priority for our Board is valuing and developing our people. To support this priority, the directors discuss talent development and management succession for senior leaders with the Chief Executive Officer, who provides his assessment of those leaders and their potential to succeed in key roles.

Our Board conducts these assessments with a focus on risk management within the context of our business. These discussions provide an opportunity for our Board to ensure management is implementing development plans and programs to enhance the skills and abilities of successor candidates for critical roles. Throughout the year, the Board also meets key leaders of the Manager through formal presentations and informal events.

Communications with the Board

The Board has established a process to receive communications from shareholders and other interested parties. Shareholders and other interested parties may contact any member (or all members) of the Board, including Mr. Fernandez, our lead independent director, any Board committee or any chair of any such committee by mail or electronically. To communicate with the Board, the non-employee independent directors, any individual directors or committee of directors, correspondence should be addressed to the Board or any such individual directors or committee of directors by either name or title. All such correspondence should be sent to Royalty Pharma plc, c/o Chief Legal Officer, 110 East 59^th Street, New York, New York, 10022, USA with a request to forward the same to the intended recipient. To communicate with the Board electronically, shareholders and other interested parties should go to our website at www.royaltypharma.com. Under the heading “Investors—Contact us” you will find an online form that may be used for writing an electronic message to the Board. In general, all communications delivered to us for forwarding to the Board or specified members will be forwarded in accordance with the shareholder’s instructions. However, we reserve the right not to forward any spam, solicitations, abusive, threatening or otherwise inappropriate materials.

CORPORATE RESPONSIBILITY AT ROYALTY PHARMA

We believe that our corporate responsibility policies and practices will create sustainable long-term value for Royalty Pharma, our shareholders and other stakeholders, and employees while also helping us mitigate risks, reduce costs, protect the value of our brand and identify new opportunities.

The Board, primarily through its Nominating and Corporate Governance Committee, oversees the integration of corporate responsibility across our business and culture and in reviewing our progress against our commitments. Our directors bring a diverse set of skills, experience and expertise on a variety of corporate responsibility matters and on governance generally, and provide feedback to management with respect to our business and corporate responsibility strategy and practices.

Our Corporate Responsibility Committee, comprised of management from across various business functions, contributes to the establishment of Royalty Pharma’s practices and policies as well as the integration of corporate responsibility into our business.

Our Principles

 

Responsible Investment Policy

Royalty Pharma is committed to responsible investment through:

The table below describes Royalty Pharma’s corporate responsibility integration processes across investments:

Social and Human Capital Policies and Practices

We are committed to our people, our stakeholders and the community as a whole. We have a variety of programs to incentivize and support employees, from employee ownership of our shares to comprehensive benefits and training. We are also committed to other policies and practices designed to fulfill our commitment to social and human capital development. Our Board and its Management Development and Compensation Committee provide guidance to management on workplace and culture. More information about our total rewards package is available on our website, www.royaltypharma.com, under “Responsibility—Building and supporting talent.”

RP Management Equity Incentive Plan

All employees and consultants of the Manager are eligible to receive equity compensation in the form of restricted Class A ordinary shares pursuant to the RP Management Equity Incentive Plan. These awards are subject to forfeiture and transfer restrictions until the applicable vesting conditions are satisfied. The Class A ordinary shares available under the RP Management Equity Incentive Plan are issued and outstanding Class A ordinary shares that were previously held by affiliates of the Manager. No newly-issued Class A ordinary shares will be issued under RP Management Equity Incentive Plan. None of our named executive officers have been granted awards of restricted Class A ordinary shares pursuant to the RP Management Equity Incentive Plan. As of December 31, 2023, the number of Class A ordinary shares that have been awarded and are subject to vesting under the RP Management Equity Incentive Plan and the number of Class A ordinary shares that are available to be issued under the RP Management Equity Incentive Plan are shown in the table below.

Diversity, Equity and Inclusion

The Nominating and Corporate Governance Committee has set forth in its charter its commitment to include, for the purposes of filling any vacancies on the Board, qualified candidates who reflect diverse backgrounds, including diversity of gender and ethnicity, in each search for new directors. 60% of our directors are gender or ethnically diverse, and this remains a priority for our Nominating and Corporate Governance Committee.

As part of our continued commitment to Diversity, Equity and Inclusion, we published our U.S. Federal Employment Information Report (EEO-1). The data in the consolidated EEO-1 report is based on our population in the United States as of December 31 and reflects our U.S. workforce as of that time. Our EEO-1 report is available on our website, www.royaltypharma.com, under “Responsibility—Responsibility resource center.”

Codes of Conduct that Foster Compliance and a Culture Focused on Ethics

As our shareholders and other stakeholders increasingly focus on the importance of corporate responsibility topics, Royalty Pharma benefits from our longstanding commitments to conducting our business in ways that are principled, transparent and accountable. The foundation of these commitments is expressed in our Code of Business Conduct and Ethics, which we require all officers and employees of the Manager to review and sign. We extend our high standards to suppliers who do business with Royalty Pharma, expecting them to uphold the human rights, labor, health and safety, environmental and business ethics practices prescribed in our Supplier Code of Conduct available on our website, www.royaltypharma.com, under “Investors—Corporate governance.”

Employee Engagement, Communication, Management and Leadership Training and Development

We are investing in employees’ long-term development and engagement by delivering training and development programs and a culture where our people can thrive and maximize their potential. We require annual regulatory training in compliance, cybersecurity and workplace respect and inclusion, among other topics. We also provide or support periodic job-specific and other developmental training and support for employees so they can maximize their potential.

We provide leadership training to managers on topics including negotiation skills and unconscious bias awareness. Each team offers ongoing learning and development opportunities tied to deepening the subject matter expertise of their professionals.

Our success depends on employees understanding how their work contributes to our strategy, culture and values. We use various channels to facilitate open and direct communication, including internal calls and meetings with employees, training and policy updates, and social and family outings and events.

Our Environmental Focus and Sustainable Business Practices

We are focused on the environment and recognize the importance of treating our natural resources with the greatest respect, so that they are available to future generations. As a socially responsible business, we are actively aware of the major issues affecting the environment.

As part of our efforts to reduce our emissions and create deeper environmental efficiencies, since 2022, we have reported our greenhouse gas (“GHG”) emissions assessment with support from our Board and management team. This assessment will serve as a valuable resource in the development of our mitigation and reduction strategies. We will continue to enhance our transparency and accountability by reporting our Scope 1 and 2 emissions in addition to select Scope 3 emissions.

You can access our GHG reporting within our GRI and SASB Summary, as well as our corporate responsibility reporting and policies on our website, www.royaltypharma.com, under “Responsibility—Responsibility resource center.”

DIRECTOR COMPENSATION

The Management Development and Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the compensation of our non-employee directors. We pay our independent directors according to our Independent Director Compensation Policy, described further below. All members of the Board are reimbursed for reasonable costs and expenses incurred in their service on our Board.

Highlights of Our Program:

Independent Director Compensation Policy

Each independent director is generally entitled to receive the following compensation for his or her service on our Board:

The following table sets forth the total compensation for our directors who were compensated for the year ended December 31, 2023. Messrs. Giuliani and Riggs began receiving compensation for their service on our Board after the 2023 Annual Meeting. Mr.  Legorreta did not receive any compensation for his service on our Board in 2023.

Director Compensation for 2023

share units, respectively (determined by dividing $250,000 by the volume weighted average price of the Class A ordinary shares for the ten trading days immediately prior to such grant date of June 23, 2023). As of December 31, 2023, Dr. Bassler, Dr. De Souza, Ms. Engelbert, Mr. Fernandez, Mr. Giuliani, Mr. Hodgson, Dr. Love, Mr. Norden and Mr. Riggs held 7,747 unvested restricted share units, respectively.

Director Share Ownership Guidelines

The Board expects all independent directors to display confidence in Royalty Pharma by ownership and retention of a meaningful amount of our shares. Each independent director is expected to own shares with a fair market value equal to five (5) times the director’s annual cash retainer of $150,000. Each independent director appointed or elected to the Board after our IPO has five (5) years from the date of appointment or election to the board to meet this requirement. Compliance for such directors is measured at the five (5) year anniversary date of the director’s appointment or election. Each independent director’s continuing compliance with the ownership guidelines will be measured at least once a year by the Management Development and Compensation Committee.

The chart below shows each independent director’s compliance with the ownership guidelines as of the Record Date. Directors are also subject to the same Insider Trading Policy that prohibits hedging and speculative trading as our officers and employees.

= Met guidelines.

Equity Compensation Plan Information

The following table shows information, as of December 31, 2023, regarding Royalty Pharma’s Class A ordinary shares authorized for issuance under Royalty Pharma’s 2020 Independent Director Equity Incentive Plan (the “EIP”), which is described in more detail below. As of December 31, 2023, other than as described below, no equity securities were authorized for issuance under equity compensation plans not approved by shareholders.