Today in Basel, Novartis shareholders ratified Joerg Reinhardt's move into the chairman's seat. That might be considered the final, official farewell in former Chairman Daniel Vasella's long goodbye. But shareholders also approved other, more nitty-gritty changes in corporate governance that explicitly undo some of Vasella's work.
It's as if the company ($NVS) has shut the door behind Vasella and called in house cleaners to dust away his fingerprints. "It strikes me as a deliberate attempt to officially call the end of the Vasella era at Novartis," Florian Wettstein, director of the Institute for Business Ethics at Switzerland's University of St. Gallen, told The Wall Street Journal.
If you've been following Novartis news lately, you know those nitty-gritty changes--the disbanding of two board committees that kept Vasella in the loop on M&A deals and executive pay, among other things--are just a small part of the ongoing overhaul there. The Swiss drugmaker sold off its blood diagnostics business, announced a strategic review of its other smaller businesses, and continued a global cost-cutting effort with layoffs, facility closures and consolidations, and more.
Obviously, the strategic review runs counter to Vasella's most obvious project--diversifying Novartis beyond the patent-dependent, risky pharma business. But there are more direct and personal shifts, too. As the WSJ points out, the company has nixed Vasella's long-time plans to build a $110 million training center next door to his lakeside home near Zurich. It's selling the 12.4-acre property, according to its annual report, perhaps to Vasella, who has an option to buy.
Novartis is also backing away from the exorbitant executive pay Vasella enjoyed. That's partly for political reasons; it was Vasella's controversial 72 million-franc non-compete agreement that helped push Swiss voters to approve new restrictions on executive pay. Though Novartis rescinded that deal, the damage was done--and now has to be repaired.
Early in his tenure, Reinhardt promised more reasonable compensation policies. Now, the company is preparing to implement those strict new pay limits--known as the Minder initiative--approved by Swiss voters. And CEO Joe Jimenez tells the WSJ that it "will take time to unwind" the impact on Novartis' reputation.
Vasella's last remaining tie to Novartis is a consulting agreement that replaced that ill-advised non-compete. He's guaranteed $250,000 a year in fees for training some of the company's most promising up-and-comers, at $25,000 per day. That contract started Nov. 1. The company's annual report says he didn't coach anyone in either November or December.
He also walks away with the title of honorary chairman, which the company bluntly describes as a bit of window-dressing. No pay, no duties, simply the title.
How does Vasella feel about all this? He wouldn't comment for the WSJ. But he's made one big change in his life that suggests he's happy to leave his past at Novartis behind. Rather than retiring at home in Switzerland, he's left the country. Destination: United States, where attitudes toward executive pay are much more liberal. If Novartis were based in the States, Vasella might well have kept that 72 million franc contract.
- see the release from Novartis
- get more from the WSJ (sub. req.)
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