The second: Pay cuts are coming for some top Novartis executives.
According to Landolt, Novartis' board is working on a new compensation plan that hews closely to shareholder value. It will be designed to be easily understood, and "it will lead to significant reductions," Landolt told the newspaper in a Q&A.
Novartis executives have consistently been among the highest-paid in Switzerland, and their packages fit right in with executive pay in the more freehanded U.S. But earlier this year, Swiss voters approved new restrictions to corporate compensation--and Novartis' pay practices played a role in that. The company's $78 million exit arrangement with outgoing chairman Daniel Vasella, which went public as the election neared, played a role in pushing the so-called "fat-cat" compensation measure over the top.
So, is the Novartis board shooting for compensation arrangements more on par with the Swiss drugmaker's European counterparts Sanofi, whose CEO barely qualified for FiercePharma's 20 highest-paid biopharma CEOs list? Maybe GlaxoSmithKline ($GSK), which didn't make the list at all? Or just slightly less than its present arrangements?
Landolt suggested Joerg Reinhardt's compensation as an example. The newly installed Novartis chairman is set for an annual salary of 3.8 million francs, or about $4.2 million--a major reduction from his predecessor Daniel Vasella's $13.98 million pay. True, Vasella had served for decades at the top of Novartis, as CEO, chairman or both, so his compensation grew accordingly. Still, at less than a third of Vasella's, Reinhardt's contract is a big change.
Novartis directors are still hammering out the new compensation system, and we won't know the nitty-gritty for months. It will go up for a shareholder vote at the 2014 annual meeting. What we do know is that, for 2012, Novartis CEO Joe Jimenez collected $14.154 million, putting him in 11th place in the biopharma business, down from $15.7 million and 7th place in 2011.
Crosstown rival Severin Schwan's compensation package amounted to just over $13 million in 2012. With the prospect of a binding shareholder vote on pay, Roche's compensation committee may have its red pencils out for cuts, too. Stay tuned.