Novartis – Vasella’s bonus doesn’t compute

Manifest has released it’s first executive remuneration analysis using the Obermatt Bonus Index. The analysis of Swiss-quoted Novartis shows that former CEO Daniel Vasella’s received a bonus in 2009 almost three times the amount he would have been due based on the relative earnings growth of the company’s peer universe.

According to Manifest’s calculations, Vasella’s total bonus for 2009 is 6.3 million Swiss Francs – more than twice the target bonus level and some 4 million CHF above the maximum level based on the Obermatt Bonus Index recommendation. Against a benchmark group of 91 global blue chip companies, Novartis’ performace (measured against earnings) was in the bottom quartile. On that basis, the bonus should have been closed to 50% of the target bonus level.

As highlighted in Reuters coverage of the Manifest/Obermatt report, Novartis’s share price has struggled during Vasella’s tenure, and has barely moved in a decade. It closed out 2009 at 56.5 Swiss francs, against 56.75 in May 2001. Net sales have grown to $44.3 billion in 2009 from $24.7 billion in 2003, while operating income has increased to more than $11 billion from $5.9 billion. Last year, growth in both sales and operating earnings was at 11 percent. Among peers which have already reported 2009 results, AstraZeneca reported growth at 26 percent and Roche at 8 percent.


Obermatt Bonus Index – Novartis Case Study >>

Obermatt 2009 Study >>

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