GlaxoSmithKline CEO Walmsley nets £2.5M pay bump as overhaul starts to play out

Emma Walmsley
To emphasize GSK's innovation focus championed by CEO Emma Walmsley as the consumer health split draws near, the company is shifting its long-term incentives award measure more to R&D. (GlaxoSmithKline)

The year 2019 was transformational for GlaxoSmithKline as the British pharma folded in Tesaro and formed a consumer health joint venture with Pfizer. The progress is reflected in CEO Emma Walmsley's 2019 pay package.

Last year, GSK handed Walmsley £8.37 million ($10.81 million) in total compensation, up from £5.89 million in 2018, according to the company’s annual report (PDF). The major contribution to growth comes from vesting of long-term awards, which totaled £5.08 million, as 2019 marked the first three-year performance evaluation point for that marker since she took helm in 2017.

As the company carries out an innovation-focused overhaul championed by Walmsley, the board is also tying execs’ paycheck further to that new focus.

Walmsley’s base salary in 2019 climbed 8% to £1.11 million, and to reflect her performance, a second planned salary increase of 8% took effect in January, meaning her 2020 base salary will reach £1.20 million.

As the first woman to ever lead a Big Pharma company, Walmsley’s salary previously drew public attention because it came in lower than her predecessor Andrew Witty’s. The GSK board explained that it initially set that pay below Witty's to reflect that Walmsley was new to the top role. The two-step salary increases for 2019 and 2020 were set at the time and tied to her performance.

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Walmsley’s annual bonus dropped about 8% from last year’s to £1.75 million. It appears that it was the group’s financial performance that slightly dragged on that term.

In 2019, GSK sales rose 8% at constant currencies and hit £33.8 billion, mainly thanks to continued strong performance from shingles vaccine Shingrix. But its operating margin sank 1.9% to 26.6%.

When examining the company’s performance over the past three years, GSK’s board concluded that two-thirds of 2017 awards were up for vesting. Specifically, innovative new product sales—cue Shingrix—and free cash flow both reached their maximum targets.

However, GSK’s total shareholder return only ranked 8th among a comparator group that includes AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, Novartis, Pfizer, Roche and Sanofi. Therefore, no performance share will vest from that metric—for the second consecutive year.

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With the $5.1 billion Tesaro buy, Walmsley doubled GSK’s oncology pipeline. The Pfizer consumer health JV was created for an expected spinoff in the next two years so that the remaining GSK can focus on innovative drug R&D.

To emphasize that innovation priority, which has “particular importance in anticipation of our separation,” the GSK board is introducing a new “pipeline progress” measure to its long-term incentives awards starting from 2020. After the adjustment, 60% of its long-term evaluation will focus on delivering immediate business progress, while the remaining 40% will be centered on R&D and new launches. That means if GSK’s big R&D pivot pays off, more awards could be up for grabs in the future for Walmsley and other execs.

For 2019, GSK is awarding Walmsley £6.1 million worth of long-term performance shares, which won’t be up for evaluation for three years.