Sector News

Novartis chief’s 2018 take-home pay suffers—not from Cohen but from low-grade returns

February 12, 2019
Life sciences

Novartis CEO Vas Narasimhan navigated through a tough and transitional year at the drugmaker, racking up almost $10 million in salary, incentive pay and equity awards for his efforts. But his 2018 take-home pay took a hit on longer-term shareholder returns that weren’t up to par.

The top executive’s pay didn’t suffer, however, from a painful political scandal stemming from a consulting agreement with President Trump’s personal lawyer Michael Cohen—even though Novartis’ societal trust accounts for 8% of his target bonus.

After officially taking the helm on Feb. 1, Novartis awarded Narasimhan 9.92 million Swiss francs ($9.89 million) in compensation at grant value in 2018, according to a company filing with the U.S. Securities and Exchange Commission. That’s quite a bit less than former CEO Joe Jimenez racked up in 2017 after eight years at the helm: CHF 13.10 million ($13.05 million) in total.

The new chief took home about one-third less than his 2018 package of salary plus equity awards, which includes longer-term incentive pay that won’t be up for assessment and payout for three years. Narasimhan’s “realized compensation”—a.k.a. take-home cash—came to CHF 6.7 million, which includes incentive pay awarded in previous years.

That cash payout might have been higher had Novartis shares performed better over the past few years. Narasimhan collected exactly 0% of that portion of long-term incentive pay, thanks to three-year returns that fell short of its peers, which for calculation purposes include Pfizer, Sanofi, Bristol-Myers and other Big Pharmas.

As for his equity awards for the year, Narsimhan earned good marks in all categories, particularly “innovation,” where the board gave their chief executive a “significantly above” evaluation, citing a robust pipeline—including some newly acquired projects—that ranked Novartis No. 1 on EvaluatePharma’s World Preview 2018 report in June. And the company’s planned Alcon spinoff and OTC divesture to GlaxoSmithKline, among other moves, earned Narasimhan an “above” score on the company’s operational objectives.

The CEO even met expectations in the “building trust with society” category despite the Cohen scandal and ongoing bribery investigations in Greece and South Korea, which the securities filing mentioned only obliquely. Narasimhan dealt with “[i]mportant reputational matters” during the year and is “addressing them,” the annual filing states.

The Cohen news broke in May, early into Narasimhan’s stint. Former CEO Jimenez took the blame for setting up the Cohen contract, and General Counsel Felix Ehret, who reviewed it, stepped down. Narasimhan “met” the board’s expectation in coping with that now-infamous contract signed under Jimenez’s reign.

It was left to Narasimhan to lead a damage-control effort, both internally and in public. In a letter to employees, Narasimhan called the payment a mistake and said he “was not involved with any aspect of this situation.”

Ehrat, who had served as Novartis’ top lawyer since 2011, also acknowledged the contract as an error and decided to retire to “take personal responsibility to bring the public debate on this matter to an end,” he said in a statement mid-May.

Taking his job was Shannon Thyme Klinger, who had just been promoted to the executive committee on Apr. 1 as chief ethics, risk and compliance officer. That promotion earned Narasimhan kudos in the filing as well.

Ehrat still got a handsome compensation package despite the disgraceful retirement, though. His total pay through the end of May reached CHF 3.99 million, boosted by a CHF 2.35 million chunk of other compensation that might be attributable to severance fees. In comparison, Klinger has received a total of CHF 2.02 million since April. In 2017, Ehrat’s pay package was worth CHF 4.34 million.

Promoting the chief ethics role is part of Narasimhan’s plan to regain public trust—one of his five top priorities.

“I never want Novartis to achieve our financial performance or objectives because we compromised on our ethical standards or our values—we must always choose our values,” he told investors.

By Angus Liu

Source: Fierce Pharma

comments closed

Related News

September 19, 2021

From Pfizer to Argenx: A look at potential blockbusters awaiting FDA decisions this year

Life sciences

This year has already witnessed a handful of memorable FDA approvals. But the race isn’t over yet. Looking to close out 2021 with FDA approvals stand four potential blockbusters from the likes of Argenx, UCB, Pfizer and Roche, according to Evaluate Pharma. Those meds combined are worth roughly $7.1 billion in sales cumulatively by 2026, according to Evaluate’s estimates.

September 19, 2021

Horizon partners with MIT for crowdsourced rare disease solutions, narrows to 5 finalists

Life sciences

Getting started is often the most difficult part—and that’s especially true in rare diseases and diagnoses. Patients and families often spend many years searching for their diagnosis starting point. For Horizon Therapeutics’ first innovation challenge, it took that struggle to heart and asked for technology-based rare disease solutions that result in faster or more accurate diagnoses.

September 19, 2021

Research identifies possible link between antibiotic use and breast cancer growth

Life sciences

Researchers from the Quadram Institute and the University of East Anglia (UEA) discovered that treating mice with broad-spectrum antibiotics increased the rate at which their breast cancer tumours grew.

Send this to a friend