Carl Icahn Issues Open Letter To Shareholders Of Forest Laboratories

Carl Icahn today issued the following open letter to shareholders of Forest Labs

entitled: THE EGREGIOUS LACK OF CORPORATE GOVERNANCE AT FOREST LABS Corporate governance experts believe that widely held public companies should not have more than one or two non-independent directors, because it could be detrimental to the company. At Forest Labs we believe that there are 5 non-independent directors on the 10 person board, and that it has been detrimental to the company. It is time to institute true director independence at Forest. It is not too late to change the dysfunctional dynastic culture at Forest and save the company. The Forest Labs Annual Meeting will take place on August 15, 2012. In my opinion, corporate governance failures at Forest are among the chief factors leading to its dismal results. Forest Lab's enterprise value has declined by $7.9 billion, or 55%, during the last 10 years and its stock price is down more than 50% from its peak 8 years ago. Moreover, we believe that Forest was inadequately prepared for the Lexapro patent cliff resulting in an estimated 80% decline in earnings for the upcoming fiscal year. In exercising your vote at this year's annual meeting consider that AT LEAST 50% OF THE BOARD CONTINUES TO LACK TRUE INDEPENDENCE. Let us consider the non-independent board members: I. Howard Solomon: A Man In "Total Control" At Forest. In 2010, Howard Solomon was 82 years old and was serving as both Chairman and Chief Executive Officer of Forest. Corporate governance experts will tell you that it is often bad policy to make one person both Chairman and CEO; among other things, being CEO is a full-time job and it is doubtful that one person can do both effectively. Moreover, the Chairman can serve as an essential check on the authority of the CEO. In 2010, however, it appears Solomon did not believe that being just Chairman and CEO was enough and when the Company's President and Chief Operating Officer suddenly resigned, the directors turned to Mr. Solomon, who was already filling the jobs of Chairman and CEO, and ANOINTED him president and did not appoint a replacement COO. Or at least that is the official version of events. Based on what we saw of the Board minutes last year, we do not feel that it is inappropriate to speculate that what really happened was that Mr. Solomon simply announced to the Board that this is what was going to happen and no one on the Board was forceful enough to say no. Whatever the real case, it appears to us that the continuing management drift at the Company comes in part from the fact that everything is now centralized in the 84-year old Mr. Solomon. II. The Presiding "Independent" Director, Kenneth Goodman lacks true independence, yet he still remains in this important role. The company claimed to be improving its corporate governance by appointing Kenneth Goodman as its Presiding "Independent" Director. But Goodman has been involved with Forest for 32 years as an executive that reported directly to CEO Solomon and as a director. Further, he continues to receive annual benefits from the company, which this year alone was more than $200,000, including almost $87,000 to offset taxes. We believe a truly independent and responsible Board would not have appointed a Presiding "Independent" Director who lacks true independence. III. Dan Goldwasser, Chair of the Compensation Committee, has overseen flawed compensation policies for decades and has been a Board member for 35 years. Mr. Goldwasser has presided over compensation practices that we believe to be egregious. These include, but are not limited to, the following: Compensating Howard Solomon with over $60 million in cash, equity and other compensation over the last 8 years, even though the Forest Labs stock price declined by over 50% during that period. Vesting schedules of equity awards were too short, not linked to performance and favored the CEO. The Compensation Committee had not previously engaged an independent compensation consultant. The Chair of the Committee chose the peer group for comparison purposes. The Chair of the Committee circulated a report of factors he believed were relevant to determining compensation including a report prepared directly by management. Compensation was not linked to pre-determined performance measures. There were no stock ownership requirements.