Almost 40% of shareholders vote down Novartis board package at AGM after first ever say-on-pay

AGM is first ever advisory vote on remuneration following investor campaign.

Almost 40% of shareholders at Novartis, the giant Swiss pharma company, today (February 22) voted against the company’s board pay after a vocal investor campaign against the CHF25m (€19.4m) market value of the package handed last year to board chairman, Daniel Vasella, and the CHF13 million paid to CEO, Joe Jimenez. This year is the first time that investors have been able to vote on the pay of many Swiss companies, including Novartis, after Swiss investors campaigned to have an advisory say-on-pay vote at the annual general meeting (AGM). That campaign and the latest at Novartis have been led by Ethos, the Geneva-based foundation which looks after more than CHF2.3bn (€1.4bn) in assets for more than 100 pension funds and foundations. Following the shareholder pressure on say-on-pay, Novartis this year published a detailed report on the remuneration of its board and executive management. Ethos said that in 2010, total remuneration paid to Novartis directors and executive management amounted to CHF82m.
At today’s AGM, 61% of investors approved the advisoryvote on the remuneration report, while 38.3% opposed and 0.7% of shareholders abstained.
Dominique Biedermann, Ethos’ executive director said: “The strong opposition to Novartis’ remuneration system shows that many shareholders do not agree with the amounts and the structure of remuneration. We urge the board of directors to review the remuneration system and to submit it again to the vote at the 2012 annual general meeting of shareholders.” Ethos said it believed the variable component of executive management remuneration should be smaller when compared to base salary. In 2010, it said, the variable part represented 87% of CEO Jiminez’s total remuneration, which it said could lead to risky decisions being taken that are not in the long-term interests of shareholders. Furthermore, Ethos said more than 80% of variable board remuneration at the pharma giant is given for performance measured over a single year rather than over several years, which many investors consider to be best practice. It said the company should also enable shareholders to be able to make a fair value comparison of its board pay against peer companies.