New Novartis chairman rolls back Daniel Vasella’s practices
The man who replaced Daniel Vasella as chairman of Novartis is rolling back many of the hands-on practices of his predecessor by curtailing his role at the Swiss pharmaceutical group and cutting the size of its board.
Jörg Reinhardt, who took over the helm of the world’s largest pharma group by sales in August, said that he had abolished two board subcommittees scrutinising deals and finance, and removed the directors’ influence over approval of the remuneration of several senior managers.
“We are giving greater responsibility to the executive management committee,” he told the Financial Times. “As chairman of the board . . . the most important is to make this step out of operational responsibilities to guidance and support,” he said.
The comments came after sharp investor criticism of the Novartis board at the start of this year in approving Mr Vasella’s proposed SFr72m six-year non-compete “golden handcuff” departure package, which was eventually scrapped.
Mr Vasella built Novartis over 17 years through bold acquisitions, and only split the roles of chairman and chief executive in 2010, when he offered the latter post to Joseph Jimenez while still retaining much operational influence.
Mr Reinhardt stressed that his own annual pay of SFr3.8m ($4.3m) – less than a third of Mr Vasella’s SFr13.1m last year – would include no stock options or performance-related element. “It helps you to be independent,” he said.
He also said the board would in future be shrunk from 14 to 12 members as existing directors retire, and Novartis was likely to seek individuals with commercial and emerging markets experience in its next round of recruitment.
The appointment of Mr Jimenez as CEO in 2010 triggered Mr Reinhardt’s departure as Novartis’s chief operating officer, and he took charge of Bayer HealthCare until Mr Vasella called to offer him the chairmanship early this year.
Mr Reinhardt avoided criticism of Mr Vasella and stressed he had “good relations” with Mr Jimenez. But since his return, he has overseen a strategic review that has already led to the sale of its diagnostics division, and could spark disposals of its consumer health and vaccines divisions. Mr Vasella recently cautioned against such divestments.
He said he was seeking to more tightly integrate its main three businesses – generic and patented drugs and eyecare – with new salary structures tied to performance of the entire group rather than individual divisions.
He said the board’s approval of remuneration contracts would in future be limited to those on the 11-strong executive management committee. “The idea is to clearly separate board from management responsibilities,” he said.
Mr Reinhardt said he had scrapped Mr Vasella’s “chairman’s committee” which approved all transactions valued at $50m-$500m, and its finance committee, “which wanted to be involved in operational aspects”.
However, in a sign of his own background in pharmacology and his commitment to innovative drugs, he has also created a new board committee for research and development.