Once again, the pay package given Novartis chairman Dan Vasella is causing a ruckus. At the annual meeting yesterday in Basel, Switzerland, only 61 percent of shareholders backed the compensation plan, the first time remuneration was put to a vote. This is not considered a very good showing, however, and in fact, Dan and Novartis ceo Joe Jimenez were criticized for their salaries and because a chunk of their pay is not tied to long-term performance,The Wall Street Journal writes.
So what did Dan receive? According to the Novartis annual report, he earned about $8.5 million last year, including cash and stock. Separately, Dan also received a one-time retirement benefit worth $12.8 million. But Ethos, a shareholder activist organization, calculates he earned around $27 million. And Rudolf Meyer, who heads the Actares activist group, called Vasella's retirement package "scandalous." The ISS proxy advisory firm also rejected the compensation plan.
How did Dan respond? He pointed out that a majority of shareholders did support the compensation plan and noted that high salaries are the norm in the pharmaceuticals industry. Of course, two wrongs do not make a right... In the future, however, the shareholder meeting will vote on significant changes to compensation, at least every three years, according to the paper. But not everyone is impressed.
"The strong opposition to Novartis' remuneration system shows that many shareholders don't agree with the amounts and the structure of remuneration," Ethoc executive director Dominique Biedermann tells the paper. "We urge the board of directors to review the remuneration system and to submit it again to the vote at the 2012 annual general meeting of shareholders." Ethos also noted that more than 80 percent of variable remuneration performance targets were measured only over a single year (see their statement).
Dan, you may recall, has been criticized before over his pay. A year ago, he came under fire because his 2009 bonus was close to three times the amount he would have been due based on relative earnings growth among large cap peers (back story). In 2008, for instance, he received about 20 million francs, which are worth about $21 million now. And for some time, he resisted leaving the ceo job, saying it was more efficient for shareholders that he retain both positions (look here). In other words, he was the equivalent of a cheap date.
5 Comments
Ed-"remuneration" is misspelled in the first paragraph. (It's OK everywhere else.) Common error.
Dan doesn't care what shareholders think. It's good to be king!
The mafia is at Novatis too.
Dr. Booke,
I keep hearing and seeing that comment on blogs. Even on the Novartis link to cafe pharma.
What do you mean when you say the mafia is at Novartis?
I'm just curious.
I coined the Novamafia and Bigpharmafia.This with good reasons. If you consider what this comany and most other bigpharmafia companies are doing, you can not help but think Mafia, pharmafia that is. Yes they make huge returns and profits, The shareholders are looked after and everyone working for them is paid well over other biz. Even cleaning lady in bigharmafia biz is better off then in say car biz. Do they deserve it? Partially yes. This biz is very profitable and deserves that "extra" considering it saves lives of millions upon millions. But and it is a big BUT do they deserve that much like in case of Don* Vasella et al and where is that kind of money coming from? They don't and the money that makes this kind of obscene take possible is not coming ONLY from LEGAL sources and activity. This is where the "mafia" component comes in. Novartis for sure and I'd bet most of the bigpharmafia companies have the business model that includes good deal of illegal and criminal activity to secure such obscene takes and compensations in the end. What that means is that Don* Vasella and all others are part of bigpharmafia wise guys who have developed and approved this mafia style biz culture that has made criminal, mafia style practices part of their overall biz approach.So instead of using ONLY legal practices they use illegal and unethical to enhance their returns. You see whan you combine legal and illeagal you get the best returns. Say you are selling Novartis' Diovan pushing its approved indications. You may sell say 1 billion per year.But If you include one or two unapproved offlabel indications like heart filure and post MI ( early in the launch of the this drug only treatment of hypertensino was approved) into promotional mix you may sell 2 Billion or at least 25% plus in addition to selling it only for blood pressure indication. So now you have all that extra profit in millions upon millions to use as part of your compensation. This was done worldwide not only with Diovan but every drug they have in promoted portfolio. In US they got caught recently and paid $422 Million in fine for Diovan offlabel and few other drugs. Do you think they hurt? Not at all and the proof is Don* Vasella's take. And he is not the only one. What a biz? Or shoud we say what a mob who is looking ofter our health. *Not a spelling mistake.