BASEL Swiss drugmaker Novartis's (NOVN.VX) outgoing chairman Daniel Vasella told shareholders on Friday he had made a mistake in negotiating a $78 million pay-off, as he tried to quell public outrage ahead of a national vote on whether to impose strict limits on corporate pay.
The Basel-based drugmaker scrapped plans this week to pay Vasella 12 million Swiss francs ($13 million) annually for six years to stop him working for rivals, after news of the package sparked a fury of criticism by politicians and investors.
"The fierce reaction and reproaches that were made as a consequence of the many-sided discussions about my compensation did leave its mark on me," 59-year-old Vasella said in his opening address to 2,688 shareholders gathered at Novartis's annual general meeting in Basel.
"I made two avoidable mistakes: the first was to even negotiate this contract. And the second to believe that giving up this individual payment to charities would be considered as something positive by society."
News of Vasella's pay-off is widely seen as giving impetus to a referendum to give shareholders a binding say on shareholder pay and ban "golden handshakes" for new arrivals and "golden parachutes" for departing managers, like Vasella.
Despite harsh words from shareholders, Vasella visibly relaxed at the meeting after vice-chairman Ulrich Lehner lauded his achievements over the 17 years he has spent at the helm. He also said the course of events showed the company took the concerns of shareholders seriously and there was no need for a "regulatory corset."
The latest poll published on Wednesday, and conducted before news of Vasella's pay-off broke, showed 64 percent in favor of the initiative. Voters will head to the polls on March 3.
"Go give the board a hard time," the driver of a packed number 14 tram in Basel told passengers heading to the shareholders meeting.
Scrapping the payment has done little to appease some investors, with activist shareholder group Actares urging shareholders to reject a so-called discharge for Novartis's board for their performance last year in protest at their agreeing to the pay-off.
"We have the impression that no-one had the courage to challenge the chairman who in the course of 10 years as chairman and CEO increasingly became an autocrat," Dominique Biedermann, director of Geneva-based shareholder group Ethos told the AGM.
Rudolf Meyer, president of Actares, referring to Vasella as the "King" and the "Kaiser," said he hoped members of the board would be able to speak more freely following his retirement.
Some shareholders were not content with criticism. Swiss lawyer Hans-Jacob Heitz is seeking a criminal complaint against Novartis and its compensation committee, alleging a breach of trust.
But not all speakers at the meeting, which was covered live on Swiss national television, were critical.
One small shareholder thanked Vasella for his philanthropy and said he hoped the future leadership would continue to support charitable causes, both in developing countries as well as in Basel.
Novartis is also holding a non-binding vote on the company's compensation system and four new board members are up for election, including 56-year-old Joerg Reinhardt, a Bayer (BAYGn.DE) healthcare head, who will take over as new chairman on August 1.
($1=0.9294 Swiss francs)
(Additional reporting by Paul Arnold; Editing by Greg Mahlich)