Novartis scraps noncompete payment

New York TimesFebruary 19, 2013 

— Novartis, the Swiss drugmaker, said Tuesday that it had scrapped a planned $78 million payment to its departing chairman because of pressure from shareholders and lawmakers.

Novartis said it had canceled the agreement to pay Daniel L. Vasella 72 million Swiss francs over the next six years to keep him from sharing his knowledge with competitors. The decision comes three days before the company’s board is to face investors at the annual shareholder meeting.

“We continue to believe in the value of a noncompete; however, the decision to cancel the agreement and all related compensation addresses the concern of shareholders and other stakeholders,” Novartis’ vice chairman, Ulrich Lehner, said in a statement.

The size of the planned payment, which was disclosed last Friday, had outraged investors just two weeks before a Swiss referendum to give shareholders more power to determine executive compensation. Vasella had previously said that he would step down as chairman at Novartis’ shareholder meeting on Friday.

In a statement, Vasella said he understood that many in Switzerland found the amount of the compensation “unreasonably high, despite the fact I had announced my intention to make the net amount available for philanthropic activities.”

On Friday, Vasella had said the annual payments were “according to fair market value” and that it had been important to Novartis that he refrain “from making my knowledge and know-how available to competitors and to take advantage of my experience with the company.”

Swiss lawmakers and shareholder activists criticized the company for not making the amount of the planned payment public earlier. They also contended that the payment was just the latest of several bad decisions by Novartis on executive pay.

Novartis has a plant in Holly Springs that employs 480 full-time employees and 120 contract workers. The billion-dollar plant is to produce the influenza vaccine, Flucelvax, which is the first vaccine made from animal cell culture rather than chicken eggs.

The plant is designed to supply emergency vaccine to one in every four U.S. residents during a pandemic. Once it’s completed, the plant will be able to provide 150 million doses within six months of the declaration of a pandemic.

Staff writer David Bracken contributed to this article.

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