Novartis, Dr. Vasella cancel non-compete agreement
The Novartis board of directors and Dr. Daniel Vasella, chairman of the company’s board, have agreed to cancel Vasella’s non-compete agreement with Novartis and all related conditional compensation. The agreement was to take effect after Vasella steps down as chairman of the board on February 22, 2013.
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. 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 $12.9 million for six years, for a maximum total payout to Vasella of $77.9 million, assuming all conditions were met. Vasella previously expressed his intention to make available the net amount received under the non-compete for philanthropic activities.
"The board and Dr. Vasella agreed to cancel the non-compete agreement and to forgo all compensation linked to his non-compete," said Dr. Ulrich Lehner, current vice chairman, who will serve as chairman ad interim until the designated chairman is elected. "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."
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."