The sparks that were expected to fly at Novartis’ annual general meeting barely flickered as the Swiss firm’s shareholders unanimously approved the re-election of Daniel Vasella as both chairman and chief executive for another three years.
However dissident investors who have complained about Dr Vasella’s pay package will feel that they have won a small victory after the company said that it will not go ahead with any golden parachute severance payments once its leader leaves the company. Managers at Novartis have previously been eligible for compensation of up to five times their annual salary if the company is taken over by a competitor.
Dr Vasella’s estimated compensation package last year was around 44 million Swiss francs, or around $40 million, and some shareholders suggested that such a sum is not particularly appropriate given the lack of movement seen in Novartis’ share price over the six years since he has been at the helm. However, vice chairman of the board, Ulrich Lehner, told the AGM in Basle that “91.8% of Dr Vasella's compensation is variable, meaning performance-related," therefore "if the performance is not there ...then the compensation will go down,” but “hopefully not."
Dr Vasella also defended his dual role as chief executive and chairman, saying there is more than one correct way regarding the composition of a company's management and noted that the Novartis board meets without him if it is discussing issues regarding his role. As well as re-electing Dr Vasella, the AGM also approved a 17% increase in the dividend for 2006 to 1.35 francs per share.
Unrepentant over India lawsuit
Most of the tension at the AGM was actually experienced outside the building where protesters gathered to criticise Novartis’ decision to sue India over its patent laws, a move brought on by the country's patent office to decline coverage for its cancer drug Glivec/Gleevec (imatinib). Some shareholders also asked Novartis to drop the lawsuits in India, which are being heard in Chennai, but Dr Vasella rejected that idea and told the AGM that “we don't want popularity awards, we want to serve our patients and remain competitive," adding that "we are only concerned with protection of intellectual property in India."
However critics, notably Mèdecins Sans Frontiéres, have argued that the changes in Indian law sought by Novartis would make it harder for poor people to obtain inexpensive medicines for HIV/AIDS and other diseases. Proceedings in the case were adjourned until March 26 and a final ruling is expected by the end of April.
Novartis’ shares rose almost 5% on Tuesday and while Dr Vasella’s re-election helped the share price, the gain was due to the news earlier in the day that the firm had received approval from the US Food and Drug Administration for its hypertension drug Tekturna (aliskiren).