Novartis – Fake news?

The news hit in early May 2018: The international press had a field day.

„The general counsel for Swiss drugmaker Novartis has resigned, the company announced Wednesday, over his role in a consulting contract with President Donald Trump’s longtime personal attorney that has wrapped the company up in U.S. federal investigations.

Novartis’ CEO has previously acknowledged that “we made a mistake” in paying Trump attorney Michael Cohen $1.2 million as part of a yearlong contract aimed at understanding how the president might approach healthcare policy in the U.S. On Wednesday, Novartis general counsel Felix Ehrat said he would resign, effective next month.“

The normal reader, and it seems journalist as well, understood that Felix Ehrat somewhat unceremoniously exited Novartis. How did so many people misinterpret and misunderstand?

Fake news is any act or omission connected with the distribution, furthering, manufacturing and otherwise supporting or encouraging fake information. It is also the conscious act of letting the fake news continue to be distributed.

However if we look at the Novartis Annual Report 2018, page 155, Felix Ehrat receives almost CHF 4 Million for 2018. So rather than negative consequences from the Trump-Cohen scandal, he is in fact spectacularly rewarded.

On page 142 Novartis Annual Report 2018 is a description of compensation steps in the case of „Voluntary resignation or termination by the Company for misconduct”

Reward for misbehavior? Far from a divorce from Novartis, in reading the small print, Novartis „offered“ Felix Ehrat, and he decided, to „accept retirement“. A completely different kettle of fish to the understanding any reasonable spectator had comprehended. Through this retirement, Felix Ehrat may be in a far better position than if he had actually toiled for the rest of his career.

Novartis policy lays out the consequences of resignation and firing, as being the loss of unvested equity and other punitive steps. On the other hand, a retirement brings with it accelerated vesting of equity and a whole lot of other cash prizes and benefits.

Reading the Compensation Report of the Novartis Annual Report 2018 it is seen that Felix Ehrat has been incredibly well compensated, around 4 million Swiss Francs, for his contributions in 2018.

Will he be in addition sucking tens of millions out of the udder of the Novartis Pension fund for the foreseeable future?

Why did Vasant Narasimhan make no active effort to correct any of these media reported „misunderstandings“ on the many talk shows and investor conferences where he appeared? Can it be alleged that it was convenient for Novartis to appear that it had taken correct governance actions in „severing ties“ with Felix Ehrat? In the light of the Novartis Annual Report 2018 the impression that Felix Ehrat had been fired or resigned has been shown to be incorrect. Surely through omission Vasant Narasimhan has misled shareholders?

The Swiss Shareholders Association contends that it is not only highly risky to usurp the integrity of the printed and broadcast press through the disseminating or failure to stop the dissemination of false facts. The news media may not take kindly to be the unwitting accomplices to this fake narrative that Novartis tried to establish, giving the impression that it followed good governance and divorced itself from one of the architects of the questionable deal with Donald Trump’s attorney, Michael Cohen.

Thus the question: where is the Accountability?

After the avalanche of fake news tending to show Novartis in a positive light, appearing that they held alleged misbehaving executives to account, the reality looks different.

Indeed a huge reward given to one of the alleged architects of the Michael Cohen payments does seem inappropriate.

This incident was one of Vasant’s first big decisions. People were expecting from Vasant a new type of leadership. In the light of the way he handled the fallout of the payments to Michael Cohen / Donald Trump, his appointment to CEO appears primarily a continuum of the old ways of doing things?

From the Swiss Shareholders Association perspective, Novartis needs a major change of leadership. We believe that the majority of the board needs to be replaced, based on the history of Novartis ethic mis-steps and Novartis’ continual appearance in the press for major misbehavior scandals.

Likewise there needs to be zero tolerance for misbehavior or acts that bring Novartis and Switzerland into a bad light.

Novartis can only have a positive and healthy future if improves governance and accountability.

CNN
Novartis top lawyer quits over Cohen payments

MSNBC – Rachel Maddow
Novartis fires their General Counsel

Wallstreet Journal (WSJ)
Novartis Top Lawyer Departs

The Local
Novartis dumps general counsel over payments to Trump lawyer

Bloomberg
Novartis General Counsel to Step Down After Cohen Payments

New York Post
Novartis lawyer Felix Ehrat resigns after payments to Michael Cohen

Biospace
Novartis' Top Attorney Falls on $1.2 Million Sword, Resigns

The Guardian
Top Novartis lawyer steps down over Michael Cohen payments

Pharma Times
Novartis legal head resigns over Cohen payments

Financial Times
Top Novartis lawyer quits after payments to Trump aide