Novartis has again changed a company policy in an effort to move past the Michael Cohen scandal. This time, it has revised how its salesforce is compensated, putting less emphasis on bonuses.
The company disclosed the change on an investor call on Monday. Sales associates’ “variable” pay, or bonuses, were reduced to a maximum of 35% of their total compensation.
Shannon Klinger, Novartis group general counsel, suggested the change is meant to discourage unethical sales practices.
“We’ve seen a 39% reduction across the division in the number of reported cases with respect to ethical conduct within the field in August of 2017 compared to August of 2016,” Klinger said on the call. “Internally, we’re encouraged by these results, but will continue to monitor to make sure that our compensation structures, writ large, drive the right behavior for this organization.”
These employees will also need to meet a specific rating on the company’s “values and behaviors” scale, a two or greater on a three-point ranking, to receive a bonus.
“That’s the way we’ve tried to introduce a balance in terms of making sure we reward for performance while discouraging that sort of behavior,” Samir Shah, head of investor relations, said on the call.
Novartis has been working to repair its reputation and beef up its internal ethics division since reports surfaced of the company’s contract with Michael Cohen, President Donald Trump’s former personal lawyer. The company initially said Cohen did no work on behalf of Novartis, despite it paying out a $1.2 million year-long contract to him. It was later revealed that former CEO Joe Jimenez exchanged emails with Cohen about drug-pricing policy and potential investments.
Since these reports, Novartis has been reworking its executive team and ethics policies. In August, the company named Siemens exec Klaus Moosmayer its new chief ethics, risk, and compliance officer, replacing Klinger. Moosmayer is set to join Novartis at the end of the year.
On the investor call, Shah also shared the board’s five pillars 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 tone at the top,” Klinger said, on the call. “We’ve made quite clear to the organization, but also publicly, that we never want Novartis to achieve financial performance objectives because we compromised on our ethical standards or our values. We must always choose our values.”