6.C Board Practices Corporate Governance Framework

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6.C Board Practices Corporate Governance Framework Item 6. Directors, Senior Management and Employees 6.C Board practices Corporate governance Framework Novartis is committed to effective corporate governance, The Novartis corporate governance principles are fur- and our corporate governance framework is intended to ther elaborated in key governance documents, in partic- support sustainable financial performance and long- ular in our Articles of Incorporation and the Regulations term value creation for our shareholders, patients, of the Board, the Board Committees and the Executive employees and other stakeholders based on our Values Committee (Board Regulations) (www.novartis.com/ and Behaviors. investors/company-overview/corporate-governance). The Governance, Nomination and Corporate Responsi- bilities Committee (GNCRC) regularly reviews both the corporate governance principles and the key governance documents against evolving best practice standards and new developments in line with our commitment to main- taining the highest standards. Governance bodies GENERAL MEETING OF SHAREHOLDERS Approves operating and financial review, Novartis Group consolidated financial statements and financial statements of Novartis AG; decides appropriation of available earnings and dividend; approves compensation of Board and Executive Committee; elects Board members, Chairman, Compensation Committee members, Independent Proxy and external auditor; adopts and modifies Articles of Incorporation EXTERNAL AUDITOR BOARD OF DIRECTORS Provides opinion on AUDIT AND COMPENSATION GOVERNANCE, RESEARCH & RISK compliance of Novartis COMPLIANCE COMMITTEE NOMI NATION AND DEVELOPMENT COMMITTEE Group consolidated COMMITTEE CORPORATE COMMITTEE financial statements and RESPONSIBILITIES the financial statements COMMITTEE of Novartis AG with applicable standards and Sets strategic direction of Novartis, appoints and oversees key executives, approves major transactions and Swiss law, on compliance investments of the Compensation Report with applicable law, on effectiveness of internal controls over financial reporting, and on the EXECUTIVE COMMITTEE corporate responsibility reporting of Novartis Responsible for operational management of Novartis 163 Item 6. Directors, Senior Management and Employees Group structure and shareholders Group structure HCBA). The total market value of the 29.3% free float of Novartis India Ltd. was USD 67.8 million on December 31, Novartis AG and Group companies 2019, using the quoted market share price at year-end. Novartis AG, the Group’s holding company, is a corpo- Applying this share price to all the shares of the com- ration organized under Swiss law with issued registered pany, the market capitalization of the whole company shares and registered office at Lichtstrasse 35, CH-4056 was USD 231.2 million, and that of the shares owned by Basel, Switzerland. Novartis was USD 163.4 million. The principal subsidiaries and associated companies of the Novartis Group are shown in “Item 18. Financial Significant minority shareholding owned by the Statements—Note 32. Principal Group subsidiaries and Group associated companies.” The Novartis Group owns 33.3% of the bearer shares of Roche Holding AG, with registered office in Basel, Swit- Divisions zerland, and listing on the SIX Swiss Exchange (ISIN Novartis has two focused, customer-facing divisions: CH0012032113, symbol: RO). The market value of the Innovative Medicines, which includes the Novartis Group’s interest in Roche Holding AG, as of Decem- Pharmaceuticals and Novartis Oncology business units; ber 31, 2019, was USD 16.9 billion. The total market value and Sandoz, the generics and biosimilars division. The divi- of Roche Holding AG was USD 278.4 billion. Novartis sions are supported by the Novartis Institutes for BioMed- does not exercise control over Roche Holding AG, which ical Research (NIBR), Global Drug Development (GDD), is independently governed, managed and operated. Novartis Technical Operations (NTO), Novartis Business Services (NBS), and corporate functions. A detailed review of the 2019 business results can be found in “Item 18. Shareholders Financial Statements—Note 3. Segmentation of key fig- ures 2019, 2018 and 2017.” In April 2019, Novartis com- Significant shareholders pleted the spin-off of its former eye care division, Alcon, According to the Share Register, as of December 31, into a separately traded standalone company. 2019, the following registered shareholders (including nominees and the ADS depositary) held more than 2% of the total share capital, with the right to vote all their dicines/Pharm Me ace shares based on an exemption granted by the Board ive ut at ic v al (see “—Item 6.C Board practices—Shareholder partici- no B s In us pation—Voting rights, restrictions and representation— in s e 1 n s Registration restrictions”): io s t c s n e u r f v % holding of i c e share capital e t a s Dec 31, 2019 r o ( Shareholders registered for their own account: N p r B Emasan AG, Basel 3.5 o S C ) Novartis Foundation for Employee Participation, Basel 2.1 UBS Fund Management (Switzerland) AG, Basel 2.1 y gy g lo % holding of o S ol share capital a co n nc Dec 31, 2019 d On o / M /sO z a es Shareholders registered as nominees: n ) ne uf TO ni actu g (N cici Chase Nominees Ltd., London 10.4 rin eddi Me eve M The Bank of New York Mellon, New York 3.8 avatitvi InInnoov Through The Bank of New York Mellon, Everett 2.0 Through The Bank of New York Mellon, New York 1.2 Through The Bank of New York Mellon, SA/NV, Brussels 0.6 Shareholdings Nortrust Nominees Ltd., London 3.9 Shareholder acting as American Depositary Share (ADS) depositary: Majority holdings in publicly traded Group JPMorgan Chase Bank, N.A., New York 12.5 companies The Novartis Group owns 70.7% of Novartis India Ltd., 1 Excluding 5.7% of the share capital held as treasury shares by Novartis AG or its fully with registered office in Mumbai, India, and listing on the owned subsidiaries Bombay Stock Exchange (ISIN INE234A01025, symbol: 164 Item 6. Directors, Senior Management and Employees According to a disclosure notification filed with Number of shares held Novartis AG, Norges Bank (Central Bank of Norway), Oslo, held 2.1% of the share capital but was not regis- Number of tered in the Share Register as of December 31, 2019. registered % of registered As of December 31, 2019 1 shareholders share capital According to disclosure notifications filed with Novartis AG and the SIX Swiss Exchange, each of the 1–100 25 442 0.06 following shareholders held between 3% and 5%, but 101–1 000 97 161 1.59 was not registered, or registered with less than 2% of 1 001–10 000 34 884 3.84 the share capital as of December 31, 2019: 10 001–100 000 3 080 3.16 • BlackRock Inc., New York 100 001–1 000 000 451 5.45 • The Capital Group Companies Inc., Los Angeles 1 000 001–5 000 000 64 4.96 5 000 001 or more 2 29 50.66 Disclosure notifications pertaining to shareholdings filed Total registered shareholders/shares 161 111 69.72 with Novartis AG and the SIX Swiss Exchange are pub- Unregistered shares 30.28 lished on the latter’s electronic publication platform: www.six-exchange-regulation.com/en/home/publications/ Total 100.00 significant-shareholders.html. 1 At the record date of the Annual General Meeting (AGM) 2019, unregistered shares amounted to 15% 2 Duty to make an offer Including significant registered shareholders as listed above According to the Swiss Federal Act on Financial Infra- structures, anyone who – directly, indirectly or acting in Registered shareholders by type concert with third parties – acquires equity securities exceeding 33 1/3% of the voting rights of a company As of December 31, 2019 Shareholders in % Shares in % (whether or not such rights are exercisable) is required Individual shareholders 96.43 12.99 to make an offer to acquire all listed equity securities of Legal entities 1 3.52 32.77 that company. A company may raise this threshold up to Nominees, fiduciaries 49% of the voting rights (“opting up”) or may, under cer- and ADS depositary 0.05 54.24 tain circumstances, waive the threshold (“opting out”). Total 100.00 100.00 Novartis AG has not adopted any such measures. 1 Excluding 5.7% of the share capital held as treasury shares by Novartis AG or its fully owned subsidiaries Cross shareholdings Novartis AG has no cross shareholdings in excess of 5% of capital, or voting rights with any other company. Registered shareholders by country1 Overview on shareholder structure As of December 31, 2019 Shareholders in % Shares in % The following tables relate only to registered share- Belgium 0.13 1.13 holders and cannot be assumed to represent the entire France 2.06 0.29 investor base because nominees and JPMorgan Chase Germany 5.66 1.64 Bank, N.A., as ADS depositary, are registered as share- Japan 0.21 0.70 holders for a large number of beneficial owners. As of December 31, 2019, Novartis AG had approxi- Luxembourg 0.05 0.42 2 mately 161 000 registered shareholders. Switzerland 87.68 42.38 United Kingdom 0.56 26.15 United States 0.32 25.41 Other countries 3.33 1.88 Total 100.00 100.00 1 Registered shares held by nominees are shown in the country where the company/ affiliate entered in the Share Register as shareholder has its registered seat. 2 Excluding 5.7% of the share capital held as treasury shares by Novartis AG or its fully owned subsidiaries 165 Item 6. Directors, Senior Management and Employees Capital structure Share capital Convertible securities and options As of December 31, 2019, the share capital amounted Novartis AG has not issued convertible or exchange- to CHF 1 263 687 410 fully paid-in and divided into able bonds, warrants, options or other securities grant- 2 527 374 820 registered shares with a nominal value ing rights to shares, other than options (or similar instru- of CHF 0.50 each.
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