Novartis and Vasella agree to cancel non-compete and related compensation

Novartis announced an agreement on Tuesday to cancel a non-compete agreement with Daniel Vasella, the former chairman of the Novartis board of directors.

The non-compete was intended to protect Novartis, keeping Vasella from making his knowledge and know-how available to competitors who could take advantage of his experience at the company. In return, the non-compete provided for an annual payout of up to $12.9 million annually for six years, for a total of $77.4 million if all conditions were met.

Vasella previously expressed an intention to make the net amount received under the non-compete available 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," Ulrich Lehner, Novartis' interim chairman, said. "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 helped Novartis by building the company's research and development sector and by personally recruiting most of the top executives. He stepped down from his position as chairman on Friday.

"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," Vasella said. "That is why I have recommended to the board that I forgo all payments linked to the non-compete agreement."