Drug Company Cancels Non-Compete Agreement over Shareholder Complaints
Posted on Jan 01, 2016
A Swiss drug maker has cancelled its plans to pay a former chairman $78 million in exchange for his agreement not to compete. The company, Novartis, cited pressures from shareholders and lawmakers for the reason behind its change of decision. Novartis had planned to pay Daniel Vasella 72 million Swiss francs over the next six years. Under the terms of the non-compete agreement, Mr. Vasella would not share any of his knowledge with Novartis competitors.
In a statement released three days before the company’s annual shareholder meeting, Novartis vice chairman Ulrich Lehner noted that while the company still believes in the value of the planned non-compete, the decision to cancel it was made based on “concern of shareholders and other stakeholders.” The enormous $78 million payout had outraged Novartis investors. Mr. Vasella stated previously that he would step down as chairman of the company at the annual meeting. He further stated that his intentions were to make the net amount of the payment available for philanthropic activities and that the size of the payment was based upon fair market value. Mr. Vasella maintains that it is very important to Novartis that he not make his knowledge and experience available to competitors.
Even prior to the non-compete scandal, Novartis shareholders had been complaining about compensation paid to Mr. Vasella. His current salary pays him a yearly 12.4 million Swiss francs, equal to $13.4 million U.S. dollars.
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