Strategic Alignment of Executive Compensation and Shareholder Value: Analyzing Viridian Therapeutics' Inducement Grants Under Nasdaq Rule 5635(c)(4)

In recent months, Viridian Therapeutics (Nasdaq: VRDN) has leveraged Nasdaq Listing Rule 5635(c)(4) to issue equity-based inducement grants to newly hired employees, including executive roles such as its Chief Medical Officer (CMO). These grants, structured as non-qualified stock options, are designed to align employee incentives with long-term shareholder value creation while adhering to corporate governance standards. However, the strategic implications of these awards—particularly for executive compensation—warrant closer scrutiny in the context of broader market trends and shareholder expectations.

Grant Structure and Approval Process

According to a report by Viridian’s investor relations team, the company’s Compensation Committee approved non-qualified stock options for 181,450 shares of common stock in August 2025, awarded to four new employees under Rule 5635(c)(4) [1]. The exercise price for these options was set at the closing price of Viridian’s stock on the grant date, ensuring alignment with market conditions. Similarly, in March 2025, the company granted 310,700 shares to Radhika Tripuraneni, its newly appointed CMO, alongside inducement awards for nine other hires [2]. These grants are issued outside the company’s Amended and Restated 2016 Equity Incentive Plan but remain subject to its terms [4].

The vesting schedule for these awards is structured over four years, with 25% of shares vesting after one year and the remainder vesting in 36 equal monthly installments, contingent on continued employment [1]. This design incentivizes long-term retention and ties employee compensation to sustained company performance, a critical factor in biotech firms where clinical and regulatory milestones often span years.

Alignment With Shareholder Value Creation

The use of Rule 5635(c)(4) grants reflects a broader trend in corporate governance: linking compensation to performance metrics to foster alignment with shareholders. For Viridian, the inclusion of executive roles such as the CMO in these inducement programs underscores a strategic effort to align top leadership with long-term value creation. As noted in a recent analysis by AInvest, companies that structure executive compensation with performance-based incentives—such as time-vested stock options—tend to see stronger shareholder trust, particularly in high-growth sectors like biotechnology [5].

However, the absence of explicit performance-based conditions (e.g., revenue or stock price targets) in these grants raises questions about their efficacy in ensuring pay-for-performance alignment. While the four-year vesting period encourages long-term commitment, it does not inherently tie compensation to specific financial outcomes. This contrasts with frameworks like realizable pay (RP) models, which evaluate whether executive compensation correlates with metrics such as total shareholder return (TSR) [4]. Shareholders may scrutinize whether Viridian’s approach sufficiently addresses concerns about misalignment, particularly as the company advances multiple drug candidates through clinical trials [3].

Executive Compensation and Shareholder Concerns

The grant to Viridian’s CMO highlights a nuanced application of Rule 5635(c)(4), which traditionally applies to non-executive hires. By extending inducement awards to executive roles, Viridian navigates regulatory flexibility while avoiding shareholder approval, a process that could delay talent acquisition in competitive markets. Yet, this approach also risks perceptions of opacity. As highlighted in a Columbia Law School study, shareholders are more likely to oppose executive compensation packages when pay and performance appear misaligned [1]. For instance, if Viridian’s stock underperforms relative to peers while executive compensation remains high, it could trigger negative say-on-pay votes.

To mitigate such risks, Viridian must ensure transparency in how these grants contribute to long-term value. The company’s focus on thyroid eye disease and autoimmune disease therapies—markets with significant unmet needs—provides a rationale for linking executive incentives to clinical and regulatory milestones. However, without clear disclosure of how these goals align with compensation outcomes, shareholders may remain skeptical.

Conclusion

Viridian Therapeutics’ use of Nasdaq Rule 5635(c)(4) grants represents a calculated strategy to attract talent while aligning employee interests with shareholder value. The inclusion of executive roles in these programs demonstrates regulatory agility but also necessitates careful communication to avoid perceptions of misalignment. As the biotech sector continues to prioritize performance-based incentives, Viridian’s success will depend on its ability to demonstrate that these grants directly contribute to measurable outcomes—both in the lab and in shareholder returns.

Source:
[1] Viridian Therapeutics Announces Inducement Grants Under Nasdaq Listing Rule 5635(c)(4) [https://investors.viridiantherapeutics.com/news/news-details/2025/Viridian-Therapeutics-Announces-Inducement-Grants-Under-Nasdaq-Listing-Rule-5635c4-ee256c1e3/default.aspx]
[2] Viridian Therapeutics Announces Inducement Grants Under Nasdaq Listing Rule 5635(c)(4) [https://investors.viridiantherapeutics.com/news/news-details/2025/Viridian-Therapeutics-Announces-Inducement-Grants-Under-Nasdaq-Listing-Rule-5635c4-8014a676a/default.aspx]
[3] Viridian Therapeutics: Fueling R&D Breakthroughs [https://www.ainvest.com/news/viridian-therapeutics-fueling-breakthroughs-strategic-equity-incentives-2507/]
[4] Demonstrating Alignment of CEO Pay and Performance [https://www.paygovernance.com/viewpoints/demonstrating-alignment-of-ceo-pay-and-performance]
[5] GRAIL's Inducement Grants and Executive Compensation Strategy [https://www.ainvest.com/news/grail-inducement-grants-executive-compensation-strategy-path-shareholder-2508/]