CEOs are people, too. Novartis ($NVS) Chief Joe Jimenez, for instance. We can't help but wonder what Jimenez was thinking when he was shaving this morning, getting ready for the Swiss drugmaker's 2012 earnings report. He knew the company would reveal that Chairman Daniel Vasella was bowing out--and that his former colleague--and competitor--Joerg Reinhardt would step into the job.
Call it poetic justice. Or dramatic irony. Reinhardt left his COO post at Novartis in 2010, after Jimenez beat him out for the CEO's chair. And Vasella was the guy who recommended Jimenez. But now, Reinhardt replaces Vasella, neatly leapfrogging Jimenez. The CEO's former rival will become his boss.
The top-tier shuffle suggest changes to come--perhaps changes not of Jimenez's making. Coming alongside a 16% pay cut for Jimenez (and a 3% cut for Vasella), the choice of Reinhardt to steer Novartis' board could make the most confident CEO engage in a little soul-searching.
Now, the pay cut could simply be a nod to stepped-up criticism of executive compensation in Switzerland. Novartis has long served as activists' leading example of exec-pay excess. The Swiss are set to vote in early March on new rules giving shareholders more power over compensation, and Novartis shareholders themselves have a say-on-pay vote coming.
|Daniel Vasella||Joe Jimenenz|
But to add insult to injury, investors bid up Novartis' Swiss shares by 4% after the announcements hit. And analysts backed the newly named chairman. "Joerg Reinhardt coming in is good news," Barclays analyst Michael Lechten told Bloomberg. "He can hit the ground running."
Jimenez himself said that he didn't expect a lot of change when Reinhardt takes the helm. Perhaps that's true; perhaps the two men are on the same page when it comes to Novartis' strategy. But Vasella's departure ends an era at the company, at a time when Novartis is suffering from generic competition--and promising a return to growth in 2014.
And at a time when talk of sales and spinoffs is all the rage among pharma analysts. More than one noted that Reinhardt might shed some underperforming assets--such as the loss-making vaccines unit--and "unwind Novartis's conglomerate discount," as JPMorgan Chase analyst Alexandra Hauber told Bloomberg.
Reinhardt doesn't take on his new role till Aug. 1, when his contract with Bayer expires. He'll stop "active" work at Bayer at the end of February and stand for election as non-executive chairman at the Novartis annual meeting around the same time. So, all this change talk will have to wait till summer's end. Official talk, at least. What Jimenez and Reinhardt say to themselves in their respective mirrors is another story.
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