In a move that will not earn him many friends on Wall Street Swiss pharmaceutical executive Daniel Vasella, CEO of Novartis, the world's second largest pharmaceutical corporation after Pfizer, has announced today that he will not cash in on a contractual clause worth 72 million Swiss francs (approximately US-$ 78 million) after his resignation next month. By handing back his Golden Parachute after just four days of public outrage Vasella is obviously setting a very bad example for corporate executives world wide.
Vasella's announcement came in the wake of a massive storm of public outrage after the Golden Parachute clause had been made public by an unnamed source and confirmed by the executive himself on Swiss national television last Friday. The story broke in a politically sensitive environment and may have signficant long-term consequences: On March 3, Swiss voters will vote on a proposition ("Volksinitiative") for a law that would eliminate golden parachutes and advance payments to corporate executives and hand the authority to set executive pay rates to shareholders while subjecting executive pay to an annual performance review by shareholders. This proposition, popularly known as the "Abzocker-Initiative", i.e. "anti-con-artist proposition", was introduced not by some left-wing activity, but by a factory owner named Thomas Minder from the Swiss canton of Schaffhausen who also happens to be an independent member of the upper chamber of the Swiss parliament, the "Ständerat" (which is equivalent to the US Senate; Switzerland closely modeled their modern constitution, introduced in 1848, on the American constitution). Minder, whom the Wall Street Journal disparagingly referred to as a "maker of toothpaste" in an article on Monday, is one of those old-fasioned businessmen who run a mid-size business and actually make stuff, a member of what in Germany is commonly called the "Mittelstand". Minder launched his "Abzocker-Initiative" out of a sense of moral outrage over executive pay and bonuses in the wake of the big Wall Street meltdown of 2008. His "Initiative", which quickly passed the threshold of 100 000 certified signatures required for a national vote in Switzerland, met with fierce opposition from Economiesuisse, the Swiss equivalent of the US chamber of commerce, who invested 8 million Swiss francs in a campaign to defeat the proposition. As of last week, however, the proposition polled at 57% of the voting population in favor of the new law.
Then came the news of Vasella's golden parachute.
Vasella was the first Swiss executive to be paid a salary on par with US executive pay scales after the merger of Roche and Sandoz, Switzerland's two largest pharmaceutical corporations, which created Novartis in 1996. Vasella was paid north of 20 million Swiss francs, a sum that was not well received by the public at the time. When the news of his golden parachute broke last Friday Vasella didn't quite seem to understand what all the fuss was all about, but in order to appease the public, he promised to donate a part of the money to charity.
He may have started to realize that he was in trouble when a group of shareholders filed a lawsuit against him and the corporate board of Novartis on Monday.
More importantly, however, when the news broke Vasella's friends at Economiesuisse and all the other vocal opponents of the "Abzocker-Initiative", among them Christoph Blocher, a right-wing nationalist politician, media mogul and billionaire owner of a chemical corporation, instantly realized that theirs was now a lost cause. With the voting public already trending towards a yes on Minder's proposition, most observers now expect a level of approval of more than 60% yes votes on voting day.
Vasella's announcement, then, probably comes to late. Or, from a Wall Street perspective: His announcement is a useless sacrifice that sets a very bad example for corporate executives world wide, just like Switzerland is about to set a very bad example by eliminating golden parachutes and subjecting executive pay to annual shareholder review through and amendement to the country's constitution.