Imagine a pharmaceutical giant like Novo Nordisk, the brains behind blockbuster drugs Ozempic and Wegovy, suddenly imploding in a boardroom fiasco that leaves directors fleeing like rats from a sinking ship. It's a shocking turn for a company synonymous with diabetes treatment stability—but that's exactly what's unfolding right now.
Novo Nordisk's chairman, Helge Lund, along with six other board members, resigned on Tuesday following a deadlock with the company's largest shareholder. This major stakeholder is the Novo Nordisk Foundation, a nonprofit entity holding 77% of the voting rights in the drugmaker. The foundation emphasizes appointing independent directors to maintain a clear, unbiased relationship between itself and the company's operations—a principle meant to avoid conflicts of interest and ensure fair oversight.
Lund's position will now be filled by Lars Rebien Sørensen, who chairs the foundation. Sørensen isn't a newcomer to the spotlight; he served as Novo Nordisk's CEO for 16 years and was instrumental in the removal of his successor, Lars Fruergaard Jørgensen, earlier this year. This power play highlights the foundation's growing influence, as Sørensen transitions into dual roles.
But here's where it gets controversial: Who really calls the shots at Novo Nordisk? Martin Jes Iversen, an expert from Copenhagen Business School, points out that recent events have exposed the foundation as the true powerhouse, wielding more authority than many anticipated. It's a shift that challenges the traditional view of corporate governance, where shareholders and boards balance power dynamically.
At the core of this clash is the pace of transformation at Novo Nordisk. The company has seen its market value plummet by about 45% this year, sparking intense debates about strategy and leadership. For context, Ozempic and Wegovy are medications that have revolutionized diabetes and obesity management—Ozempic helps control blood sugar, while Wegovy aids weight loss by mimicking hormones that regulate appetite. Their success has made Novo a household name, but the rapid growth has also strained resources.
Lund revealed that the foundation pushed for a broader overhaul of the board beyond his suggestions, on top of the company's announcement in September of 9,000 job cuts. These layoffs are part of efforts to streamline operations amid the turmoil. Critics, however, argue the board's decisions contributed to several blunders. For instance, Markus Manns, a portfolio manager at Union Investment (a Novo shareholder), highlighted issues like launching Wegovy without adequate manufacturing capabilities, which allowed competitors such as Eli Lilly to gain ground. Another misstep involved the trial design for CagriSema, a new weight-loss injectable, which made it hard to directly compare its effectiveness against Wegovy or Eli Lilly's Zepbound. Perhaps most glaringly, Novo underestimated the explosive demand in the U.S. consumer market, where patients pay out-of-pocket for these drugs, missing out on potential revenue.
And this is the part most people miss: The foundation's demands go beyond routine changes. In a chat with Danish newspaper Berlingske, Sørensen stressed that the company needs a board ready for round-the-clock collaboration with management. He noted a desire for fresh faces and a quicker decision-making style, suggesting the old board wasn't agile enough for today's fast-paced pharma landscape.
Analysts were stunned by the extent of the shake-up. Barclays research expressed surprise at the magnitude, while a Swedish expert called it a "complete meltdown." Boardroom upheavals like this are uncommon in Denmark, where foundations control major players like Lego, Carlsberg, and Maersk. These entities are often seen as reliable, long-term guardians of business stability, prioritizing steady growth over short-term profits. But Novo Nordisk, under Sørensen, seems to be shattering that mold.
Iversen, who has analyzed foundation-run companies for 25 years, admitted the foundation's focus on market capitalization growth caught him off guard. This raises eyebrows about whether these nonprofit stewards are evolving into more profit-driven entities. He also pondered potential corporate governance dilemmas, especially with Sørensen holding leadership at both the foundation and the company—a setup that could blur lines and raise questions about accountability.
Historically, Novo Nordisk has been a beacon of consistency, with only five CEOs since its 1923 founding and a sharp focus on diabetes care. Yet, 2024 has been brutal for Lund, who also resigned as chairman of UK energy giant BP in April after activists pressured a reversal of its green energy shift. As a former McKinsey consultant from Norway, Lund became a target for shareholder ire, navigating turbulent waters in two industries at once.
The foundation's proposed new directors signal Sørensen's vision for renewal. Among them are Mikael Dolsten, Pfizer's chief scientific officer, bringing cutting-edge pharma expertise from the U.S., and Stephan Engels, a finance veteran from banks like Danske and Commerzbank. Novo Nordisk declined to comment on the situation.
This drama begs the question: Is the foundation's aggressive push a necessary reboot for innovation, or is it overstepping into risky territory that could alienate investors? For beginners in corporate governance, think of it like this—foundations are supposed to act as neutral watches, ensuring companies thrive ethically. But here, the watch has grabbed the steering wheel, potentially prioritizing speed over balance. Do you think this power grab will pay off, or is it a recipe for more chaos? What are your thoughts on how nonprofits should influence for-profit giants? Share your opinions in the comments—do you side with the foundation's reforms, or do you worry about the implications for transparency and stability?
