Hogg Heads off the Rebels
Byline: ALEX BRUMMER
GLAXOSMITHKLINE is taking extraordinary steps to defuse shareholder disquiet ahead of the release of its annual report next week.
Chairman Sir Christopher Hogg is determined to avoid the humiliation of last year when GSK and its chief executive Jean-Pierre Garnier were given a bloody nose by shareholders, who rejected the group's pay report by just over 50pc.
Hogg has been on a charm offensive, visiting key investors with critical sections of the pay report, in an effort to explain the overarching principles behind this year's remuneration.
Despite his effort there is still fear in the GSK camp of a noisy revolt at the agm with local authority pension funds leading the hue and cry. Early counts suggest that 20pc of investors could vote against - a substantial minority.
Many of the bad elements of GSK's pay structure have been eliminated and Hogg has moved to improve the board so that it meets the Higgs requirement.
Garnier, as first reported here, has agreed to move, without compensation, to a 12-month package.
His quirky pension arrangements, under which Garnier was treated as if he were older than he is, have been normalised and brought into line with all GSK employees in the United States.
The big problem is the absolute size of the pay, bonus and options package.
GSK operates on both sides of the Atlantic so it is caught between the overgenerous compensation culture of America and the more frugal - surprising as that may seem - practices in Britain.
The aim is to find good comparisons and to this end GSK has veered towards BP and Vodafone, which have huge US operations.
So one might expect Garnier's overall package to clock in at close to [pounds sterling]6m, provoking questions as to whether the performance criteria are testing enough.
Another embarrassment will be a further payout to former chairman Sir Richard Sykes, currently shaking the tree at Imperial College. He is expected to receive [pounds sterling]900,000 under an options plan put in place at the time of the Glaxo/SmithKline merger which is just maturing. He is one of 200 senior bosses who benefit.
Once Hogg comes through this year's pay and agm season, the push will be on to find his successor. One person who can be ruled out is senior independent director Sir Ian Prosser, not the flavour of the month among City investors at present after the Sainsbury fiasco. …