GlaxoSmithKline is showing its claws. The drugmaker is planning to add "clawback" provisions to its bonus structure, which would allow the company to get the money back if its fortunes worsen--or if, as in the banking industry, the gains driving those bonuses prove to be a mirage.
The radical change to Glaxo's compensation rules was devised by Sir Robert Wilson, who holds the reins of the directors' remuneration committee. Inspired by the "rewards-for-failure" culture in finance, Wilson says his clawbacks would help quell investor worries about runaway executive compensation.
And the pay overhaul doesn't stop there. Wilson wants Glaxo to use cross-industry comparisons to judge its executives' performance. In the past, Glaxo's management was compared only to their Big Pharma rivals. Now, Wilson would like to look past pharma for its benchmarks. "The proposed changes are designed to strengthen the alignment of GSK's remuneration arrangements with views expressed by investors, particularly those in the UK," Wilson said in the company's annual report, "and to reflect better GSK's UK home base."
As you know, executive pay has long been an issue in the U.K. and Europe. Investors regularly protest overlarge pay packages. In fact, Glaxo's outgoing CEO, Jean Pierre Garnier (photo), found himself in the line of fire just last year. Shareholders opposed a $4 million-plus retention package for Chris Viehbacher (photo), who had lost out to Andrew Witty (photo) in the race for Garnier's job.
- read the story in the Daily Mail