Novartis said its board and Chairman Daniel Vasella agreed to cancel the compensation agreement, which included a six-year, non-compete clause, The Wall Street Journal reported.
The deal was to have taken effect Friday, when Vasella, 59, intends to exit the company at its annual shareholder meeting, the newspaper said.
A Novartis spokesman said Vasella would still receive some compensation tied to his past performance.
"We believe the decision to cancel the agreement and all related compensation addresses the concerns of shareholders and other stakeholders," Novartis Vice Chairman Ulrich Lehner said, adding the company's directors "understood the importance of full transparency and will strengthen its efforts in this regard."
The lucrative package had elicited some harsh criticism, The New York Times had reported Monday. Swiss Justice Minister Simonetta Sommaruga was quoted as saying the size of the pay was an "enormous blow for the social cohesion of our country."
The sum was "beyond evil," said Christian Democratic People's Party President Christophe Darbellay.
The severance plan was revealed just two weeks before Swiss voters are to decide a referendum that would give shareholders power of deciding executive pay.