Novartis has cancelled its outgoing chairman Daniel Vasella’s payout of $78m (£50.3m) which was supposed to prevent him from working with rival drug makers. The Swiss pharmaceutical company did a U-turn which stemmed from the sharp protest in Switzerland. The decision from Novartis came as new legislation is being prepared to tighten shareholder scrutiny of executive pay. Novartis said the accord provided for a maximum annual payment of 12 million Swiss francs (£8.39m) a year for six years, which was annulled owing to public pressure.
Daniel Vasella, who has been under fire for being the epitome of exorbitant executive pay in Switzerland, said in the statement he understood that Swiss people found the compensation too high. Daniel Vasella, who is to step down on February 22 this year, earned 13.1 million francs (£9.16m) for 2012, which was more than double the rest of Novartis’s board combined and slightly down from 13.5 million francs (£9.44m) the prior year.
The departing chairman’s outgoing pay package attracted a raft of criticism from top-ranking Swiss politicians and members of the country’s pro-business lobby, against the backdrop of a March 3 referendum to give shareholders a veto over excessive manager pay.
Under Daniel Vasella’s leadership, Novartis was formed with the 1996 merger of Sandoz AG and Ciba-Geigy AG, a transaction that ranked as the world’s largest merger at the time. Daniel Vasella served as chairman and chief executive officer until 2010, when he relinquished the CEO job to Joe Jimenez.
Novartis rose 0.2% to 64 francs (£44.75) this morning in Zurich. The stock has gained 29% in the past year, including reinvested dividends, compared with a 20% gain for the Bloomberg Europe Pharmaceuticals Index.