▍ Source/Cyber blue
▍ Author/Ania
Not only grassroots employees, because of the new crown epidemic, salary cuts have also become the main theme of pharmaceutical executives.
1
Novartis CEO, salary cut
Recently, foreign media Fiere Pharma sorted out the 2020 financial report released by Novartis and mainly analyzed the salary of CEOs.
The Swiss pharmaceutical company's annual report shows that the company's CEO Vas Narasimhan's total compensation for 2020 was 10.38 million Swiss francs ($11.61 million), down from 11.44 million Swiss francs in 2019.
Combined with the specific data, Narasimhan's base salary did increase by 5.5% compared to 2019, and the reason for the final total compensation reduction came from the year-end bonus , a large part of which was linked to Novartis' financial results in 2020.
In fact, like other biopharmaceutical companies, Novartis has slowed down because of COVID-19. By 2020, the Swiss drugmaker has sales of $48.7 billion, the only one that falls short of the performance target set by Narasimhan's bonus.
However, this is not a value that can be easily ignored, and on his bonus scorecard, the company accounts for 18% of sales. In other financial measures, namely operating income and free cash flow, Novartis performed well. This aspect was also proven and rewarded in 2019, and Novartis' actual performance in terms of group sales, operating income and free cash flow in 2019 far exceeded expectations.
The board believes that in 2020, Narasimhan's management team "goes well beyond" its ethics-focused goals. These include a settlement over a "marathon" long legal battle over whistleblower kickback allegations. In mid-2020, the company agreed to pay more than $700 million to end allegations that it claimed to use the speaker program disguised as collecting kickbacks from doctors in exchange for prescriptions. The company also introduced a new code of ethics in September to regulate marketing practices.
In contrast to Narasingham's 2020 salary package decline, his real salary increased from 10.62 million Swiss francs in 2019 to 12.72 million Swiss francs (about 14.19 million US dollars). This is mainly because the long-term incentive he received when he became Novartis CEO in February 2018 far exceeded the incentive payment he received when he was Novartis' director of R&D.
2
A new round of salary increases
Unlike Novartis CEOs, whose total compensation declined due to year-end bonuses, AZ Global CEOs ushered in another round of salary increases.
According to the data, AZ Global CEO Pascal Soriot's annual salary in 2020 is as high as $21.5 million, an increase of 16.2% from $18.5 million in 2019 and an increase of 45.96% from $14.73 million in 2018. In terms of salary structure, its base salary is consistent with 2019, but the annual bonus is increased to $3.22 million, in addition, Pascal Soriot will also receive equity incentives from 2018.
It is worth noting that this compensation structure has been questioned before, mainly involving pension and year-end bonus schemes. In March last year, AZ's board of directors said in a compensation plan that it would reduce the base salary to 20% in 2020 based on investor feedback, and gradually align the pension level of senior executives with that of ordinary employees. However, foreign media believe that under the compensation plan, AZ's executive salary is still much higher than the average salary of ordinary employees.
At the same time, in the 2019 bonus plan, Soriot's performance can receive a 142% bonus, in order to bridge the gap between the competitive global pharmaceutical talent pool and the market's salary level, the board of directors used discretion to raise it to 150%, which was disliked by some investors.
In 2020, AstraZeneca's board of directors still increased its budget for Pascal Soriot's salary scale, to some extent affirming its leadership during the COVID-19 pandemic, which can be clearly seen in the annual report data.
On February 11, AstraZeneca announced its 2020 results, showing that the annual revenue of 26.6 billion US dollars, tumors, cardiovascular and cerebrovascular diseases, and respiratory are the three most critical businesses of AstraZeneca, of which the tumor business has grown into a major area of the company, and it is also the only business area that is growing rapidly.
Revenue from the oncology business was $11.46 billion, +24% year-over-year, contributing 43% to the company's performance, and the star product Tagrisso (oshitinib) revenue was $4.3 billion, an increase of 36%. In addition to osimitinib, Lynparza (orapali), Imfinzi (duvalliumab), Farxiga (dagliflozin) contributed significantly to AstraZeneca's growth, generating a combined revenue of $10.1 billion.
3
Roche, again to cut the basic salary
Overall, because of the black swan event of the new crown epidemic, salary cuts are actually a problem faced by more executives.
Roche's 2020 financial report shows that the total compensation of global CEO Schwan is 11.0337 million Swiss francs (about 12.2924 million US dollars), which is slightly lower than the previous year by 4.2%. Mainly in consideration of the impact of the COVID-19 pandemic on the overall economy, it has cut its contract base salary for 2020 by 500,000 Swiss francs (about $560,000).
In fact, at the beginning of 2020, foreign media asked: Why did Roche CEO Schwan's salary in 2019 drop slightly when its counterparts in European pharmaceutical companies were raising salaries?
Mostly because the company has made changes in the way it rewards performance-based stocks, these revisions have tied Schwan's compensation more to long-term growth than to short-term stock performance.
That said, Schwan's base salary of CHF 4 million ($4.3 million) did not change in 2019, but his Performance Sharing Program (PSP) incentive was reduced from CHF 1.49 million to zero. As a result, Schwan's total compensation for 2019 fell by about 2 percent to 11.5 million Swiss francs ($12.2 million).
Now, because of the COVID-19 pandemic, Schwan has once again had to face a slight drop in pay.
To some extent, the new crown epidemic has affected pharmaceutical companies from multiple levels such as research and development, clinical and sales, which is also deeply reflected to every individual in pharmaceutical companies, even CEOs at the top of the pharmaceutical industry.