Magazine article Management Today

The Human Factor

Magazine article Management Today

The Human Factor

Article excerpt

There may be some kudos to be had from being the best-paid executive, but to be the one who benefits most from failure is surely not to be boasted about.

When Sir Christopher Gent used his last annual meeting at Vodafone to criticise Jean-Pierre Garnier's now infamous contract, there were rumblings about pots and kettles. Gent certainly leaves Vodafone a very wealthy man, and the Conservative Party will be hoping that his new career will involve spending a big slice of his fortune on bettering its own fortunes.

But although many had been unhappy about the bonus Gent collected for completing the acquisition of Mannesmann, it was not a payment for failure. What is extraordinary about the GlaxoSmithKline affair is that the company had failed to understand the changed climate. Given the importance for a pharmaceutical company of dealing with governments and regulatory authorities and correctly gauging evolving public opinion, this should be giving investors even more concern than the potential cost of the golden parachute at the centre of the row.

How will GSK now be viewed when it has to negotiate on drugs prices with governments aware that generic versions of their products can be purchased at a fraction of the cost from India? The claim that drugs giants need high prices on their patented products to fund costly research is true, but governments will not fund multi-million dollar safety nets for failing executives.

Despite the militant mood of investors, Garnier insisted that he wouldn't vary the terms of a contract that could soften the blow of enforced departure from GSK to the tune of at least dollars 15 million. He continued to argue even after shareholders had voted against the package.

Even in the post-Enron world, there may be some kudos to be had in some circles from being the highest paid executive, but to be the one who stands to benefit most from failure is surely not to be boasted about.

GSK argued that Garnier's contract was not unusual by US standards and that the company has to take note of US norms. Although it maintains its primary stock exchange listing in London, GSK's culture has become increasingly American. Glaxo Wellcome retained a Britishness despite its international reach, but by the time of the merger negotiations, SmithKline Beecham was at heart a US business, headed by US-based Swede Jan Leschly. …

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