Daniel Vasella’s time at the helm of Novartis has come to an end with debate still raging over the $78m payout – now scrapped – that refocused attention on the tricky issue of executive pay.
Vasella (pictured) stepped down as chairman at Novartis’ annual general meeting (AGM) on Friday but has been given the unpaid role of honorary chairman and is reported to be negotiating a consulting role with the company.
At the AGM, Vasella admitted to mistakes in both accepting the ‘golden gag’ compensation package – that would have prevented him working for rival pharma companies for a period of six years – and also in assuming that donating the fee to charity would calm public outrage at the size of the payout.
Novartis stuck by the validity of the non-compete package last week, saying it had only decided to cancel it “to address the concerns of shareholders”. The company added it had named Vasella honorary chairman to recognise his achievements during a 17-year tenure as chairman or chief executive.
“Novartis is … losing a unique forward thinker of the industry and an extraordinarily successful business leader,” said Novartis’ board in a statement.
The furore over the compensation issue overshadowed the election of Jörg Reinhardt as chairman of the company for a three-year term.
Shareholders at the AGM also voted in a new and simpler compensation system for its senior executives, due to come into effect in 2014, that is designed to be more transparent and aligned to performance and long-term value creation.
Around a fifth of investors voted against the proposal, however, with the Financial Times reporting that the board and chairman were subjected to a string of criticism by speakers, with Vasella described as “increasingly autocratic” and the board accused of trying to keep the payout under wraps.
Novartis’ caretaker chairman Ulrich Lehner, who is in the role until Reinhart takes over on August 1, said the board “will further strengthen our efforts to provide full transparency whenever possible, as demonstrated by the changes to our compensation system”.