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Vasella forgoes golden handshake after furore

Published on 19/02/13 at 11:26am
vasella image
Dr Daniel Vasella, Novartis chairman

Novartis has backed down over plans to pay outgoing chairman Dr Daniel Vasella a ‘golden handshake’ worth $77 million (72 million Swiss Francs).

The plans to offer Vasella the money, much of it for a ‘non compete’ clause, has generated howls of protest from politicians in Switzerland and among shareholder groups.

The plans were leaked on 15 February, and now the strength of opposition has persuaded Vasella to waive the sum, and cancel his non-compete agreement with Novartis and all related conditional compensation.

The agreement was to take effect after Vasella steps down as chairman at the Novartis annual general meeting on Friday.

Novartis continues to defend the logic behind the payout, which it says was intended to protect the company, the agreement requiring Vasella to not work for competitors.

The fact that Vasella had made clear he would donate the fee to good causes was also not enough to placate the protestors.

Dr Vasella is the architect of today’s Novartis, which is set to become the world’s biggest pharma company in the next few years, based on the strong R&D pipeline Vasella helped to nurture. He has been chairman of Novartis since 1999, serving as both chairman and chief executive for 11 years from 1999 to 2010.

The non-compete agreement would have given him an annual payout of up to CHF 12 million for six years, for a maximum total payout to Vasella of CHF 72 million, assuming all conditions were met.

"The Board and Dr Vasella agreed to cancel the non-compete agreement and to forgo all compensation linked to his non-compete," said current vice chairman prof. Dr Ulrich Lehner, who will serve as interim chairman until the designated chairman is elected and assumes office on 1 August.

"We continue to believe in the value of a non-compete, however, we believe the decision to cancel the agreement and all related compensation addresses the concerns of shareholders and other stakeholders. The board understands the importance of full transparency and will strengthen its efforts in this regard."

Vasella said: "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. That is why I have recommended to the Board that I forgo all payments linked to the non-compete agreement."

Swiss referendum

Public anger against high levels of executive pay have grown in Switzerland since Swiss banking giant UBS went to the brink of collapse in 2009, attributed to a culture of excessive bonuses for top traders and executives.

The country is now preparing for a referendum to be held on 3 March specifically on the question of executive pay.  It will ask chief executives of Swiss-owned firms if a strict new system should be introduced in which executives would have their pay set by shareholders.

The plan, put forward by small businessman-turned-politician Thomas Minder would make shareholder votes on chief executive pay binding, and also ban ‘golden hello’ and ‘golden parachute’ payments.

Opinion polls show the ‘yes’ campaign is likely to win, despite warnings from industry lobby groups that it will drive business away.  The Swiss government has preparing its own alternative more moderate measures, but these will still retain a shareholder vote on management pay.

Andrew McConaghie

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