Swiss pharmaceutical giant Novartis has decided not to provide outgoing chairman Daniel Vasella with a “golden parachute” worth CHF72m (€58m) in return for his agreeing to not join the competition for the next six years.
In a statement released today (February 19), company vice-chairman Ulrich Lehner said: “The board and Dr Vasella agreed to cancel the non-compete agreement and to forgo all compensation linked to his non-compete.” The surprise move comes just three days before Novartis’ annual general meeting (AGM) in Basle.
Vasella added: “I have understood that many people in Switzerland find the amount of the compensation linked to the non-compete agreement unreasonably high, despite the fact I had announced my intention to make the net amount available for philanthropic activities.”
Details of Vasella’s severance package were disclosed during a television interview he gave last Friday. In exchange for pocketing the CHF72m, he was to be called on as an advisor until 2019 and bear the title of honorary president. During his career at Novartis, where he served as CEO between 1996 and 1999 and then as board chairman from then on, Vasella has earned an estimated CHF300m.The interview provoked outrage among shareholder advocates and the public in general. “Novartis should be ashamed itself,” said Roby Tschopp, director of Swiss small shareholder group Actares. Tschopp is an ally of Thomas Minder, whose eponymous initiative to curb excessive executive pay will be voted on in a referendum on March 3.
“I’m speechless,” said Simonetta Sommaruga, the Social Democratic minister of justice upon hearing the news.
On Monday, Ethos, the Swiss proxy advisor backed by pension schemes, demanded that Novartis cancel Vasella’s severance package and urged fellow shareholders in the firm to vote against discharge for the board at the AGM on Friday.
At the meeting, Novartis has scheduled a consultative vote by shareholders on a new scheme that will link its executive compensation closer to performance. Ethos opposes the scheme on the grounds that it does not adequately address the problem of excess executive pay at the firm.