At Novartis, our mission is to discover new ways to improve and extend people’s lives. We use science-based innovation to address some of society’s most challenging healthcare issues, discovering and developing breakthrough treatments and finding new ways to deliver them to as many people as possible. We also want to be an employer of choice and to provide superior returns to our shareholders.
The Novartis compensation system supports our business strategy. Each year we determine specific short-term and long-term targets under our incentive plans that measure the success with which our strategy is being executed. Our company values and behaviors set the expectations for how our targets should be achieved. We then reward our associates based on how and the extent to which we achieve our targets.
Our compensation system offers competitive compensation that is aligned with industry practice and supports the realization of our vision to be a trusted leader in changing the practice of medicine.
Our performance-based compensation policy applies to all associates of Novartis Group companies and is designed to:
Align the objectives of associates with the interests of our shareholders
Incentivize associates to create sustainable value for Novartis and its shareholders
Support a diverse and performance-oriented culture that allows Novartis to reward people who perform well
Be competitive with world-class companies and industry peers
Each associate is given a base salary reflecting the key areas of responsibility, job characteristics, required experience and skill set. The base salary is reviewed annually, and any increase reflects both merit based on performance as well as market movements.
Novartis differentiates between short-term and long-term variable compensation:
Short-Term Incentive Plans
The Short-Term Incentive Plan, also known as the Annual Incentive Plan, is a key vehicle through which the Novartis Group rewards its associates on the basis of a combination of business, team and individual results. These are measured against predetermined annual objectives as well as assessed values and behaviors.
In general, the Short-Term Incentive is delivered in cash to our associates. However, Novartis executives, namely Executive Committee members and Novartis Top Leaders, receive their Short-Term Incentive partly in Novartis equities with a vesting period of three-year and partly in cash. This reinforces the link between the executive’s interests and the interests of our shareholders and allows the executive the opportunity to share in the financial success of Novartis.
Long-Term Incentive Plans
The Select Awards program is the Novartis Long-Term Incentive program for selected non-executive associates. The program is designed to provide eligible associates with the possibility to build an ownership interest in Novartis and to share in our future growth opportunities. Subject to the associate’s employment jurisdiction, Select Awards are provided in form of Restricted Shares or Restricted Share Units with a three-year vesting period.
Long-Term Performance Plan and Long-Term Relative Performance Plan
The Novartis Long-Term Performance Plan (LTPP) and Long-Term Relative Performance Plan (LTRPP) are an integral element of the executive compensation system for Executive Committee members and Novartis Top Leaders at Novartis. Both plans are designed to foster long-term commitment by aligning the incentives with future Novartis Group performance. The performance period is assessed over a period of three years from the grant year. Both plans function identically, varying only in which performance conditions are applied. LTPP rewards long-term Group value creation and long-term division innovation while LTRPP rewards relative Total Shareholder Return.
Novartis benefits programs are an integral part of the total compensation policy and strategy and are designed to meet the challenges of the growing, global competition for talent.
These programs support the overall business objectives and strategy of Novartis. Benefits are aligned with local legislation and practices in each country and are established to provide a framework of security for associates and their dependents.