Pension funds-backed Ethos Foundation has criticised Novartis for making the vote on its sustainability report consultative rather than binding at its upcoming annual general meeting (AGM) in Basel on 5 March.
From this year, in fact, large Swiss companies are mandated by the new article 964 of the Swiss Code of Obligations which stipulates that the report on non-financial matters must be approved by the same body responsible for approving annual financial statements. In other words, the general meeting of shareholders. There is no reference to an advisory vote, Ethos stated.
Novartis’ board of directors is proposing to endorse the non-financial report for the 2023 financial year, considering it as an “advisory vote”, according to the AGM agenda. Ethos considers the decision contrary to the essence of the law and the interests of shareholders, it said in a statement.
“A consultative vote does not carry the same weight or has the same significance as a binding vote. This decision is totally incomprehensible, and goes against the spirit of the law, Novartis’ articles of association and the interests of shareholders,” said Vincent Kaufmann, Ethos’ chief executive officer.
Novartis does not intend to put the sustainability report to a vote because it falls under the highest responsibility of the board of directors as part of the company’s sustainability strategy, and of the firm’s overall strategy.
Ethos considers the argument “wrong” and used as example annual reports and financial statements, which also give an account of the measures taken by the board of directors in relation to the company’s strategy, which are also submitted to a binding shareholder vote.
Moreover, Article 17 of Novartis’ Articles of Association clearly states that approval of a non-financial report “shall be vested exclusively in the general meeting of shareholders”, It added.
Ethos has consulted legal experts, coming to the conclusion that “there is no doubt” that a binding vote is necessary on the sustainability report unlike, for example, the remuneration report that, according to law, can be submitted for an advisory vote, it said.
The foundation is therefore calling on Novartis to rectify this situation, if not for this year, then at least for next year, by submitting its sustainability report to a binding vote of its shareholders. It also urges all companies affected by the new provisions of the Swiss Code of Obligations to respect the essence of the law.
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