February 22, 2013 / 12:16 PM / 6 years ago

UPDATE 2-Novartis chairman says $78 mln pay-off a mistake

* Swiss referendum on executive pay on March 3

* Vasella’s $78 mln pay-off sparked public outrage (Adds results of votes)

By Caroline Copley

BASEL, Feb 22 (Reuters) - Drugmaker Novartis’s outgoing chairman Daniel Vasella said a deal to give him a $78 million pay-off was a mistake, as he tried to quell public outrage ahead of a Swiss referendum on corporate pay.

Earlier this week, Novartis scrapped a plan to pay Vasella 12 million Swiss francs ($13 million) annually for six years to stop him working for rivals, after news of the package drew widespread criticism.

A March 3 referendum in Switzerland will ask whether shareholders should have a binding say on pay and ban “golden handshakes” for new arrivals and “golden parachutes” for departing managers, such as Vasella.

“The fierce reaction and reproaches that were made as a consequence of the many-sided discussions about my compensation did leave its mark on me,” 59-year-old Vasella said on Friday in opening remarks at Novartis’s annual shareholder meeting, which was covered live on television.

“I made two avoidable mistakes. The first was to even negotiate this contract. And the second to believe that giving up this individual payment to charities would be considered as something positive by society.”

Vice-chairman Ulrich Lehner praised Vasella’s achievements during his 17 years at the helm, adding that events showed the company took the concerns of shareholders seriously and there was no need for a “regulatory corset”.

The latest poll, published on Wednesday and conducted before news of Vasella’s deal, found 64 percent in favour of greater shareholder power over pay.

“Go give the board a hard time,” the driver of a packed tram told passengers heading to the Novartis meeting in Basel.


Scrapping Vasella’s pay-off did little to appease some investors at meeting, which ran nearly four hours. Activist shareholder group Actares had said shareholders should reject a so-called discharge for Novartis’s board for their performance last year in protest at their agreeing to the pay-off.

“We have the impression that no-one had the courage to challenge the chairman who, in the course of 10 years as chairman and CEO, increasingly became an autocrat,” Dominique Biedermann, director of shareholder group Ethos told the AGM.

Rudolf Meyer, president of Actares said he hoped Novartis board members would be able to speak more freely following Vasella’s retirement.

Some shareholders were not content with criticism. Hans-Jacob Heitz, a lawyer, is seeking a criminal complaint against Novartis and its compensation committee, alleging a breach of trust.

Despite the criticism, 93 percent of shareholders granted the board discharge, while only 20 percent of shareholders rejected a new compensation system.

Four new board members, including 56-year-old Joerg Reinhardt, a Bayer healthcare head, who will take over as chairman on August 1, were elected. ($1 = 0.9294 Swiss franc) (Additional reporting by Paul Arnold; Editing by Dan Lalor and Greg Mahlich)

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