Novartis ($NVS) Chairman Joerg Reinhardt and CEO Joe Jimenez were once in competition for the chief executive post. Jimenez won out; Reinhardt left to run Bayer Healthcare. Now, Reinhardt's back--but he's not looking to lord it over his former colleague.
In fact, Reinhardt tells the Financial Times, rather than wrest power away from Jimenez, he plans to give Jimenez more. The only thing Reinhardt plans to take away? A slice of executive compensation.
|Novartis chairman Joerg Reinhardt|
As the FT reports, Reinhardt's predecessor, Daniel Vasella, kept a hand in M&A, influenced pay packages for a wide range of top managers, and kept a constant eye on finance. Reinhardt is abolishing the board subcommittee that said yea or nay to deals as small as $50 million, and he's doing the same with a subcommittee on finance. Vasella had chaired both of those groups, and the latter "wanted to be involved in operational aspects," Reinhardt said.
For Reinhardt, that's a no-no. "We are giving greater responsibility to the executive management committee," he told the FT. "As chairman of the board ... the most important [thing] is to make this step out of operational responsibilities to guidance and support."
To that end, Reinhardt is also limiting board oversight over compensation. Now, directors will review employment contracts for the 11 executive committee members only, leaving Jimenez and his team to decide the rest. Earlier this year, Reinhardt announced executive pay limits that would crimp top managers' pay but perhaps soothe investors long riled by the company's compensation plans.
The advent of the Reinhardt era comes at an important time for Novartis, which has been reviewing its various businesses since the spring with an eye to potential sales or spinoffs. At a recent meeting with investors and analysts, Jimenez said he wants to build up the company's weaker units--such as vaccines--via M&A or even joint ventures. Either that, or dispose of those units in a shareholder-friendly way. The company's animal health business is expected to be the first on Jimenez's list.
Meanwhile, as Reuters reports, Jimenez is eyeing deals worth as much as $6 billion a year--some targeted at building up Novartis' core businesses in pharma, eye care and generics, and others aimed at strengthening the smaller businesses. For the bigger units, he's eyeing bigger buys, with individual deals of $2 billion to $4 billion.
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