A few years ago, Daniel Vasella surprised the normally staid world of corporate Switzerland by turning up at the annual Novartis press conference sporting a fine beard. This did not go down too well and he subsequently shaved it off.
On Tuesday he staged another and even bigger surprise by announcing he was sacking himself as chief executive of the Swiss pharmaceutical giant.
His decision is all the more surprising given that Dr Vasella is only 57 and, apart from some minorities and Swiss corporate governance buffs, he was not under intense pressure to split his dual role as chairman and chief executive. Yet by his own admission he felt the time had come to follow what has become the prevailing trend in corporate Switzerland as well as in the European pharmaceuticals industry.
After all, though after much resistance, Peter Brabeck, Nestlé’s all-powerful chairman and chief executive, finally caved in to investor pressure and split his dual role with the appointment of Paul Bulcke as the food multinational’s chief executive. Even closer to home, the same happened at Roche, Dr Vasella’s main Swiss pharmaceutical rival in which Novartis holds a large minority stake.
At Roche, Franz Humer stepped down as chief executive to concentrate on his chairman’s role, with Severin Schwan taking over as CEO.
Big pharmaceutical groups in the US still combine the roles of chairman and chief executive. But this is no longer the case in Europe where the likes of Sanofi-Aventis, GlaxoSmithKline and AstraZeneca all have separate chairmen and chief executives. So Novartis probably felt it was time to adapt its governance structure. Indeed, Dr Vasella said he suggested this to his board in June last year.
It must nonetheless have been a difficult pill to swallow. Dr Vasella is one of the pharmaceutical industries’ longest-serving chief executives and the architect of Novartis’s transformation into a world-leading healthcare group following the merger of Ciba-Geigy and Sandoz in 1996.
He sold or spun off many businesses while expanding into new healthcare sectors through big acquisitions. Under his leadership, sales have risen significantly, as have dividends. Unfortunately, the performance of the company’s shares has been mediocre to say the least.
But that did not prevent Dr Vasella’s own salary rising sharply, turning him into one of the highest paid Swiss executives. And his vast pay and dual chairman-chief executive hat at Novartis was raising more eyebrows at a time when many round the world are under pressure to show greater self-restraint.
As a former doctor, he presumably had little difficulty in making a quick diagnosis of the situation and prescribing the necessary corporate governance medicine to bring in a fresh perspective at Novartis and help the company address its latest challenges. These include integrating its Alcon acquisition, controlling costs and coping with patent expiries.
It is all the more significant that the new chief executive chosen for this task, Joe Jimenez, the head of Novartis’s pharmaceutical division, joined the Swiss group less than three years ago after working with private equity group Blackstone and food conglomerate Heinz.
What steps should Australia take to boost its status as a global financial centre? The argument is raging in Canberra, albeit not on Tuesday during the Australia Day celebrations.
The service sector – especially financial services – is as important to the country’s economy as farms and mines.
Australia’s Treasury, which is studying 19 recommendations from a high-level review published this month, has a fair story to advance.
The country, which escaped recession, is feeling smug about how well its financial sector navigated the global financial crisis. Its top four banks rank among only nine double A-rated lenders in the world.
Thanks to a compulsory savings scheme, the country’s pensions pool is now the fourth-largest in the world and growing, helping to buttress the domestic economy.
However, the fund management industry remains overwhelmingly domestic, with only 5 per cent of funds from overseas. This compares with 80 per cent in Singapore and 64 per cent in Hong Kong.
Wholesale tax reform is also needed to transform Sydney and Melbourne into global financial centres, not least to give clarity on private equity exits.
Also, top rates of personal tax remain closer to 50 per cent than Hong Kong and Singapore’s 20 per cent. The latter two are genuine global financial centres – where more than 90,000 Aussies work.
Until that gap narrows, Australia will remain better known for its cricketers and crocodile hunters.
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