Swiss pharmaceuticals firm U-turns on $78 mn non-compete agreement
Novartis has agreed to drop a non-compete agreement for outgoing chairman Daniel Vasella following pressure from shareholders.
The company announced last week that Vasella would receive a potential SFr72 mn ($78 mn) over six years after he steps down at the annual general meeting on Friday. But investor and public anger at the scale of the payout, designed to stop Vasella sharing inside information with Novartis’ competitors, prompted the turnaround.
‘I understand 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,’ says Vasella in an official statement. He has served as CEO at the Swiss pharmaceuticals firm since Novartis was created through a merger in 1996. He was appointed chairman in April 1999.
‘The board and Vasella agreed to cancel the non-compete agreement and to forgo all compensation linked to it,’ adds vice chairman Ulrich Lehner, who will replace Vasella on an interim basis until a new chairman is elected to start in the role in August.
‘We continue to believe in the value of a non-compete but 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.’
The company’s U-turn comes less than two weeks before Switzerland votes in a referendum that could give investors more power over executive pay and company boardrooms. The 24 proposed changes to Swiss corporate law include giving shareholders a binding vote on top level pay, a ban on advance and severance packages and a requirement that board members be individually voted in each year – with criminal penalties for non-compliance.