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Novartis revises bonus on sales to external operating forces

Novartis has changed company policy again in an attempt to get over the Michael Cohen scandal. This time, it has revised the way its sales force is compensated by reducing the bonus.

The company announced the change on Monday. The “variable” salary of sales employees has been reduced to a maximum of 35% of their total compensation.

Shannon Klinger, general counsel of the Novartis Group, suggested the change is intended to discourage unethical sales practices.

“We saw a 39% reduction in the division of reported cases versus ethical conduct in this field in August 2017 compared to August 2016,” Klinger said. "Internally, we are encouraged by these results, but will continue to monitor to make sure our compensation structures, I stress, drive the right behavior for this organisation."

These employees will also need to meet a specific rating on the company's “values and behaviors” scale, two points or more out of a three-point ranking, to receive a bonus.

“This is how we have tried to introduce a guarantee balance in rewarding performance, discouraging this type of behavior,” said Samir Shah, head of investor relations.

Novartis has been working to repair its reputation and strengthen its internal ethics division since reports emerged about the company's contract with Michael Cohen, President Donald Trump's former personal attorney. Initially, the company said Cohen did not work on Novartis' behalf, despite paying him a $1.2 million-a-year contract. It was later revealed that former CEO Joe Jimenez emailed Cohen about drug pricing policy and potential investments.

From these relationships, Novartis restructured its executive team and its ethics policies. In August, the company named Siemens executive Klaus Moosmayer as its new chief ethics, risk and compliance officer, replacing Klinger. At the end of the year, Moosmayer will join Novartis.

At the investor's request, Shah also shared the board's five points to transform its culture and repair trust and reputation, which includes ethical standards and transparency and disclosure measures.

“We want to reinforce the message and the quality at the top,” said Klinger, interviewed by telephone. “We have made it clear to the organization, as well as publicly, that we never want Novartis to meet financial performance objectives because we have compromised our ethical standards or values. We must always choose our values. “

MM&M – September 21, 2018 by Alison Kanski

Related news: Novartis cuts 2,000 jobs in Switzerland

Note: Shah, who said the standard applies in all countries where Novartis operates, doesn't yet know how many employees will be ineligible for bonuses in their next assessments in October or November.

Novartis said further action may be taken where an employee fails to meet their ethics score, or they could be fired. (Reuters 09/17/2018)

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