Swiss drug maker Novartis AG (NVS: Quote) on Tuesday announced that its Board of Directors and Chairman Daniel Vasella have agreed to cancel his non-compete agreement and all related conditional compensation, citing concerns of stakeholders.
The agreement was to take effect after Vasella steps down as Chairman of the Board at the Novartis Annual General Meeting on February 22. Current Vice Chairman Ulrich Lehner will serve as Chairman ad interim until the designated Chairman is elected and assumes office on August 1.
Intended to protect the company, the non-compete required that Vasella refrain from making his knowledge and know-how available to competitors who may take advantage of his experience with the company. According to the company, Vasella knows the company’s business intimately, having built the leading R&D organization and personally recruited most of the top executives.
In return, the non-compete provided for an annual payout of up to 12 million Swiss francs for six years, for a maximum total payout to Vasella of 72 million francs, assuming all conditions were met.
Vasella said, “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 I had announced my intention to make the net amount available for philanthropic activities. That is why I have recommended to the Board that I forgo all payments linked to the non-compete agreement.”
Lehner 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. The board understands the importance of full transparency and will strengthen its efforts in this regard.”
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by RTT Staff Writer
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