Our corporate governance framework
Our system of corporate governance is based on effective checks and balances. We have a three-tier structure: the Annual General Meeting of Shareholders (AGM), our Board of Directors, and the Executive Committee of Novartis (ECN):
- Shareholders approve the company’s financial statements and other disclosures, as well as compensation for members of our Board and ECN. They also approve the dividend and elect the company’s Chairman, Board members, Compensation Committee members, Independent Proxy and external auditor.
- Our Board of Directors holds the company’s ultimate decision-making authority, with the exception of decisions reserved for shareholders. The Board represents the interests of all stakeholders. The Board operates through five committees: Audit and Compliance; Compensation; Governance, Nomination and Corporate Responsibilities; Risk; and Science & Technology.
- The ECN, which reports to the Board and is led by the CEO, is responsible for operational management, including achieving the company’s financial and strategic objectives.
The external auditor provides their opinion on the compliance of Novartis Group consolidated statements and other financial information, the Compensation Report, internal controls over financial reporting, and sustainability reporting with applicable standards and laws.
Board of Novartis
All members of the Board, including the Chairman, are independent and non-executive, as defined by our corporate governance rules. When choosing Board members, we aim for a balance of skills, expertise and experience. We believe a diverse Board, including in gender, age, nationality and ethnicity, supports long-term value creation. Most of our Board members have experience in leadership or management positions; half have direct experience in the healthcare or pharmaceutical industry.
Members of the Board are elected for one-year terms and may serve a maximum of 12 years; this term limit was approved by shareholders in 2021. The Board is subject to an annual assessment, which is carried out by an external consultant in every third year.
Board members also have regular training sessions. In 2021, these mostly virtual sessions included training on diversity and inclusion, our ethical commitments and our Professional Practices Policy, as well as insider trading, data privacy, and digital engagement for personal use. Please see below for Board highlights in 2021.
Executive Committee of Novartis
The Board appoints the ECN members and delegates to them the overall responsibility for and oversight of the operational management of Novartis. The ECN currently has 12 members and is led by the CEO (see “Our Executive Committee” for details).
Novartis AG and Novartis shares
Novartis AG, the Group’s holding company, is a corporation organized under Swiss law with its registered office in Basel, Switzerland. Novartis shares are listed on the SIX Swiss Exchange (symbol: NOVN) and the New York Stock Exchange (symbol: NVS). The latter are in the form of American depositary receipts representing Novartis American depositary shares.
Shareholders have the right to vote and to execute all other rights as granted under Swiss law and the Articles of Incorporation. All shares have equal voting rights and carry equal entitlements to dividends. The AGM usually takes place in late February or early March. Normally, shareholders can vote their shares by themselves or appoint another shareholder or the Independent Proxy to vote on their behalf. However, in accordance with Swiss legislation passed in response to the COVID-19 pandemic, it was not possible to physically attend our 2021 AGM, and shareholders could exercise their voting rights only through the Independent Proxy.
The Governance, Nomination and Corporate Responsibilities Committee (GNCRC) regularly reviews corporate governance principles and key governance documents against evolving best practice standards and new developments.
The ECN-level Trust & Reputation Committee, chaired by the CEO, meets every two months to oversee the company’s environmental, social and governance (ESG) performance. In addition, we have an ESG Management Office to further embed ESG priorities across our business.
Stakeholder engagement is key to our ESG approach. We engage with our stakeholders through regular meetings, conferences and seminars; this engagement is a key part of building trust with society. For shareholders, we organize ESG investor days and issue a quarterly progress update. For more information, please see “Our stakeholders.”
In addition, we work through external initiatives on important health, industry and social issues. Please see “External initiatives and memberships of associations” in the appendix of this report.
Board diversity profile
ECN diversity profile
1 Please note that five Board members and two Executive Committee members have dual nationalities.
Each of these nationalities is counted as a half in the above charts.
Board highlights for 2021
During 2021, the Board of Directors met nine times, including both regular and ad hoc meetings. In response to the COVID-19 pandemic, the Board held virtual, hybrid and physical meetings, with participants joining in person when possible. In their discussions, the Board and committees covered a number of issues, including:
- Progress with the company’s strategy, including therapeutic areas and technology platforms, key geographic areas and the generics business
- Review of larger strategic considerations to drive sustainable growth, such as mergers and acquisitions
- Review of the Novartis ESG strategy
- A key strategy review for the US and China markets
- Longer-term Board succession planning and required proﬁles, including proposing one new Board member candidate to be elected at the 2022 AGM
- How Novartis is prepared to respond to cybersecurity incidents
- The annual Board self-evaluation
- Discussion and approved the divestment of the Company’s investment in Roche Holding AG
- Initiation of a strategic review of Sandoz to maximize shareholder value