Novartis shareholders on Tuesday gave their chairman and CEO, Daniel Vasella, a rough ride over his pay package and double mandate.This content was published on March 6, 2007 - 19:28
But he was re-elected to both positions overwhelmingly on a day when the company's share price, which has disappointed over the past year, rose by almost five per cent.
At their annual meeting in Basel, shareholders used words like "arrogant" and "inappropriate" to describe Vasella's estimated compensation package of SFr44 million ($39.95 million) in 2006.
The vice-chairman of the board, Ulrich Lehner, stressed that executive compensation was performance based.
"Let me assure you, 91.8 per cent of Mr Vasella's compensation is variable, meaning performance related," Lehner said.
"If the performance is not there ... then the compensation will go down. Hopefully not."
However, Novartis did try to appease shareholders by scrapping Vasella's "golden parachute" severance payments when he leaves the company.
Severance for Vasella and four other senior executives is three times annual pay, and five times annual pay in case of a change in control. However, the company has not disclosed what would constitute "annual pay" for purposes of applying the multiple.
The Swiss media had helped highlight the size of Vasella's pay package with a series of articles questioning rising executive compensation at big Swiss companies, including banks UBS and Credit Suisse, and food group Nestle.
The Ethos investor foundation commented last year that executive pay at Swiss firms showed little correlation to company performance and lacked the transparency of other European countries.
And its director, Dominique Biedermann, on Tuesday criticised what he considered excessive severance payments to members of the management.
Big Swiss companies still pay their board members significantly less than comparable firms in the United States, the global leader in executive pay.
In a related development, Vasella said that the company would accept a ruling by an Indian court on the patent for its leukaemia drug Glivec/Gleevec whatever the finding.
Novartis wants to clarify to what extent its intellectual property is protected by Indian law.
The company has applied for several patents in the country, and Glivec was the first to be rejected.
Novartis sued to challenge India's decision in court in Chennai and filed a separate suit in the court, saying that India needed to loosen its laws to make it easier to patent drugs.
Critics, including Médecins Sans Frontières (Doctors Without Borders), have argued that the changes in Indian law sought by the company would make it harder for poor people to obtain inexpensive medicines for HIV and other diseases.
Earlier on Tuesday, Novartis announced it had received approval in the United States for its hypertension drug Tekturna – a potential blockbuster and the first new type of medicine in more than a decade for treating high blood pressure.
Approval by the Food and Drug Administration makes the US the first country to allow it to be sold.
The news was welcomed at the stock exchange, with the Novartis share price closing at SFr70.10, up by 4.86 per cent. But this is still down by 0.14 per cent compared with the price a year ago.
swissinfo with agencies
Novartis in 2006
Sales: $37.02 billion
Operating profit: $8.2 billion
Net profit: $7.20 billion
Number of employees: 98,788
Basel rival Roche
The chairman and CEO of the Roche pharmaceutical group, Franz Humer, said he planned to give shareholders a say over the size of managers' salaries from the 2008 shareholders' meeting.
But he told the SonntagsZeitung newspaper the shareholders' decision would be purely consultative and not binding.
Humer, who earned SFr17 million last year, also said he was opposed to the idea of a "golden parachute", citing Roche's above-average salaries.
Managers at Novartis are eligible for compensation of up to five times their annual salary if the company is taken over by a rival.
Novartis holds a stake of about a third in Roche.
This article was automatically imported from our old content management system. If you see any display errors, please let us know: email@example.com