Novartis has agreed with outgoing chairman Daniel Vasella to cancel his 72 million Swiss franc (about $78 million) compensation in the wake of criticism over the size of the package.

Dr Vasella is stepping down at the Novartis annual general meeting on February 22 and a 'non-compete' agreement was drawn up which required that he "refrain from making his knowledge and know-how available to competitors who may take advantage of his experience with the company". In return, the deal provided for an annual payout of up to 12 million francs for six years.

The non-compete agreement caused outrage, notably in Switzerland where a referendum is scheduled to take place on March 3 referendum to give shareholders a veto over large executive pay-offs. Dr Vasella had expressed his intention to make available the net amount he received under the agreement for philanthropic activities but that did not satisfy critics.

Ulrich Lehner, who will serve as Novartis chairman until a successor is elected and assumes office on August 1, said "we continue to believe in the value of a non-compete, however, we believe the decision to cancel the agreement and all related compensation addresses the concerns of shareholders and other stakeholders". He added that "the board understands the importance of full transparency and will strengthen its efforts in this regard".

Dr Vasella added that "in light of recent events and especially in view of safeguarding the company's interests…I have understood that many people in Switzerland find the amount of the compensation linked to the non-compete agreement unreasonably high", despite the fact he was giving most of it to philanthropic causes. "That is why I have recommended to the board that I forgo all payments linked to the non-compete agreement," he concluded.