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20/05/2003
GSK review pay deals after shareholder revolt
GlaxoSmithKlein (GSK) shareholders have humbled company management after they rebelled against plans to hand CEO Jean-Pierre Garnier £22 million in the event that he is sacked.
Following an angry AGM in London last night, the GSK management issued a statement announcing its decision to back down on Resolution 2 which contained the controversial pay scheme provisions.
GSK's Chairman, Sir Christopher Hogg, said: "Although Resolution 2 is advisory, the Board takes this result very seriously. The major reason for this negative vote has been the fact that there are elements of our senior level remuneration package which do not accord with what is regarded as best practice by shareholders.
"We look forward to consulting further with leading shareholders in the coming months on our proposals to balance these objectives."
However, in a letter to shareholders in March, Sir John Hogg urged shareholders to back the pay proposals. He said that if the renumeration package seemed disproportionate it was due to the culture gap between the US and UK. Sir John stressed that the matter should be agreed as if it was not, "it threatens our ability to pay competitively our top cadre of management".
He added: "The issue goes to the heart of GSK’s effectiveness. The quality of management matters enormously in a large and complex company like GSK and we attach great importance to recruiting, developing and motivating managerial talent.
"The top managers are very much in demand, are widely known and are internationally and corporately mobile. The way our managers are rewarded and developed therefore has to be competitive within the global industry. This is crucial to retaining and motivating them."
Commenting on the decision, Brendan Barber, TUC General Secretary Elect, said: "This is an extremely significant result that will have repercussions way beyond GlaxoSmithKline. Britain’s boardrooms are now on notice but there is no guarantee they will act unless the government changes the law to ban payments for failure."
The TUC had encouraged its 1,000-strong network of pension fund trustees, which covers funds worth £260 billion, to vote against the GlaxoSmithKline remuneration report. It is also circulating details of its position to fund managers and other institutional investors.
Mr Barber added: "2003 has seen an upsurge in shareholder activism, and increased trade union activity in this area. So far this season, unions have called for votes against excessive executive pay deals at Corus, Shell and Reuters in addition to GlaxoSmithKline. The TUC will be seeking to campaign against unwarranted pay deals at a number of other AGMs this year."
Jean-Pierre Garnier became CEO in December 2000 with the merger of SmithKline Beecham and Glaxo Wellcome. He joined SmithKline Beecham in 1990 as President of its pharmaceutical business in North America and served as Chairman, Pharmaceuticals from 1994 until his appointment as Chief Operating Officer in 1995.
(GMcG)
Following an angry AGM in London last night, the GSK management issued a statement announcing its decision to back down on Resolution 2 which contained the controversial pay scheme provisions.
GSK's Chairman, Sir Christopher Hogg, said: "Although Resolution 2 is advisory, the Board takes this result very seriously. The major reason for this negative vote has been the fact that there are elements of our senior level remuneration package which do not accord with what is regarded as best practice by shareholders.
"We look forward to consulting further with leading shareholders in the coming months on our proposals to balance these objectives."
However, in a letter to shareholders in March, Sir John Hogg urged shareholders to back the pay proposals. He said that if the renumeration package seemed disproportionate it was due to the culture gap between the US and UK. Sir John stressed that the matter should be agreed as if it was not, "it threatens our ability to pay competitively our top cadre of management".
He added: "The issue goes to the heart of GSK’s effectiveness. The quality of management matters enormously in a large and complex company like GSK and we attach great importance to recruiting, developing and motivating managerial talent.
"The top managers are very much in demand, are widely known and are internationally and corporately mobile. The way our managers are rewarded and developed therefore has to be competitive within the global industry. This is crucial to retaining and motivating them."
Commenting on the decision, Brendan Barber, TUC General Secretary Elect, said: "This is an extremely significant result that will have repercussions way beyond GlaxoSmithKline. Britain’s boardrooms are now on notice but there is no guarantee they will act unless the government changes the law to ban payments for failure."
The TUC had encouraged its 1,000-strong network of pension fund trustees, which covers funds worth £260 billion, to vote against the GlaxoSmithKline remuneration report. It is also circulating details of its position to fund managers and other institutional investors.
Mr Barber added: "2003 has seen an upsurge in shareholder activism, and increased trade union activity in this area. So far this season, unions have called for votes against excessive executive pay deals at Corus, Shell and Reuters in addition to GlaxoSmithKline. The TUC will be seeking to campaign against unwarranted pay deals at a number of other AGMs this year."
Jean-Pierre Garnier became CEO in December 2000 with the merger of SmithKline Beecham and Glaxo Wellcome. He joined SmithKline Beecham in 1990 as President of its pharmaceutical business in North America and served as Chairman, Pharmaceuticals from 1994 until his appointment as Chief Operating Officer in 1995.
(GMcG)
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