Our corporate governance approach

We strive to manage our company in a way that creates long-term value for our shareholders and society. Our system of corporate governance includes a fully independent Board of Directors, clearly defined shareholder rights, and transparency in executive compensation. These rules and principles support our ability to deliver sustainable financial performance and build trust with shareholders, customers, patients and the public.

Our governance structure

Novartis operates under a governance structure designed to establish effective checks and balances in the management of our company, and create long-term value for shareholders, patients, employees and other stakeholders.

Governance Bodies

General Meeting of Shareholders

Shareholders vote to approve Group consolidated financial statements and other financial information, decide the dividend, and approve the compensation of the Board and Executive Committee. They also elect the Chairman, Board members, Compensation Committee members, Independent Proxy and external auditor.

Board of Directors

The Board holds the ultimate decision-making authority for Novartis AG, with the exception of decisions reserved for shareholders. All Board members, including the Chairman, are independent and non-executive. The Board’s effectiveness is enhanced by its diversity, as reflected in nationality, gender, experience, age and tenure. Diversity is an important criterion when identifying new Board member candidates. Among its responsibilities, the Board defines the strategic direction of Novartis; reviews and approves major mergers, acquisitions and divestments; engages in risk and crisis management; and oversees succession planning for the CEO and other members of senior management. The Board exercises some of its responsibilities through the following committees:

  • Audit and Compliance Committee

    Assists the Board with monitoring the integrity of the Group financial statements, and the company’s compliance with relevant legal and regulatory requirements

  • Compensation Committee

    Assists the Board with defining the compensation strategy, as well as the compensation of the Chairman, Directors, the CEO and other executives

  • Governance, Nomination and Corporate Responsibilites Committee

    Assists the Board with overseeing governance and corporate responsibility activities, as well as identifying candidates for CEO and for election as Board members

  • Research & Development (R&D) Committee

    Assists the Board with overseeing the R&D strategy, evaluates the Novartis pipeline and the effectiveness of our R&D functions, and reviews emerging scientific trends and activities critical to our R&D success

  • Risk Committee

    Assists the Board with ensuring that risks are properly assessed and managed, oversees the company’s risk portfolio and risk management system, and reviews related actions implemented by management

Executive Committee

The Board delegates the operational management of Novartis to the Executive Committee. Under the leadership of the CEO, the Executive Committee assumes overall responsibility for and oversight of the business, including achieving financial and strategic objectives, and advancing a culture of empowerment and responsibility at the company. The CEO regularly informs the Board of current developments, and Executive Committee members regularly attend Board meetings to discuss specific topics. Board members have access to the minutes of Executive Committee meetings.

External Auditor

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 corporate responsibility reporting, with applicable standards and laws.

Board highlights in 2019

The Board met eight times in 2019. Typically, these meetings lasted two days, with the first day for Board committee meetings and the second for a meeting of the full Board.

The Board and its committees continued to focus on our strategy to transform Novartis into a focused medicines company. The Board approved major transactions during the year that expand our therapeutic platforms, including the acquisition of The Medicines Company, which adds a late-stage cardiovascular treatment to our pipeline, as well as the acquisition of Xiidra, a treatment for dry eye disease. The Board also approved the required steps for the spin-off of Alcon as an independent company, which allows Novartis to focus its capital and management attention fully on medicines.

Comprehensive risk management is an important responsibility of the Board and its committees. In 2019, both the Board and the Risk Committee evaluated the risks and opportunities associated with our digital transformation, including retaining an independent commission to advise on additional measures related to cybersecurity. The Risk Committee also analyzed drug pricing in various markets and the status of our anti-counterfeiting measures, among other topics. In addition, both the Board and the Audit and Compliance Committee reviewed the Zolgensma data integrity issue, including lessons learned and additional management actions to further strengthen the governance of newly acquired companies.

In 2019, both the Board and the Risk Committee evaluated the risks and opportunities associated with our digital transformation, including retaining an independent commission to advise on additional measures related to cybersecurity

The Board also continued to focus on developing a strong and diverse executive leadership team. In January 2019, it appointed Susanne Schaffert as President, Novartis Oncology, and in June, it appointed Marie-France Tschudin as President, Novartis Pharmaceuticals. These appointments increased the number of women on the Executive Committee from two to three, with women now leading both of our Innovative Medicines business units. The Board made a further addition to the Executive Committee in July, with the appointment of Richard Saynor as CEO, Sandoz.

Additional topics for the Board and its committees were a review of our corporate strategy, including culture as a key driver of our performance, and the results of an external evaluation of the productivity of our research and development (R&D) operations. The R&D Committee discussed broadening its remit to cover science and technology matters, including digital innovation and data science. Topics addressed during private meetings included Board self-evaluation and the performance assessment of the Executive Committee members, as well as CEO and Executive Committee succession planning.

Novartis AG and Group companies

Novartis AG, with its registered office in Basel, Switzerland, is a corporation organized under Swiss law. As the holding company, Novartis AG owns or controls directly or indirectly all entities worldwide belonging to the Novartis Group and conducting its business operations.

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.

Shareholder rights

Shareholders have the right to receive dividends and to vote at the Annual General Meeting of Shareholders (AGM), among other rights granted under Swiss law and the Articles of Incorporation. Shareholders can vote at the AGM by themselves, or appoint another shareholder or the Independent Proxy to vote on their behalf. The AGM normally takes place at the end of February or the beginning of March.

Shareholder engagement

Shareholder engagement is fundamental to our commitment to governance and transparency. The feedback we receive during these engagements helps us to create long-term, sustainable value.

We concentrate our outreach efforts on our largest 100 shareholders – portfolio managers, buy-side professionals, stewardship teams and environmental, social and governance (ESG) analysts – who represent 60% of our ownership. While the Chairman, CEO and CFO together with Investor Relations are accountable for ensuring effective shareholder engagement, other senior managers from within and outside the Executive Committee also participate in the meetings. We conduct regular outreach to investors throughout the year.

In the last two years, we have more than doubled the number of investor engagements on environmental, social and governance (ESG) matters

Shareholders increasingly seek information not only on financial metrics but also on performance against ESG criteria. We are committed to continuing our efforts to integrate ESG into our overall strategy. In the last two years, we have more than doubled the number of investor engagements on ESG matters, and in 2019, we held our first in-person ESG Day in London, led by our CEO, and our first ESG roadshow in the Netherlands. For more details on our corporate responsibility approach and performance, please see the Novartis in Society ESG Report 2019.

More information on our corporate governance is provided in the Annual Report 2019.
www.novartis.com/annualreport2019

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Articles of Incorporation of Novartis AG
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Shareholder rights

Articles of Incorporation of Novartis AG

Annual General Meeting of Shareholders

Annual General Meeting of Shareholders

Board Regulations

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Novartis code for senior financial officers

Novartis Code of Ethical Conduct for CEO and Senior Financial Officers

Novartis in Society ESG Report

Novartis in Society ESG Report

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Novartis financial data

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