The Elephant in the Room—Investors Pushing for Lower Pay for 1st Female GlaxoSmithKline CEO

March 6, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Top shareholders in the United Kingdom’s GlaxoSmithKline are complaining about the proposed pay deal for the company’s new chief executive officer, Emma Walmsley.

Walmsley will replace Sir Andrew Witty in April. Witty had a total compensation package in 2015 of £6.66 million. His base salary was £1.1 million. The deal that has been proposed for Walmsley is an annual base salary of just under £1 million. SkyNews reports that inside sources say that she would be eligible for bonuses and long-term share options worth “substantially less” than her predecessor.

“A number of shareholders,” SkyNews wrote, “have told the company that the new boss, who has been on a salary of £850,000 since being appointed as its CEO-designate last autumn, should be paid a package which more appropriately reflects her experience.”

What is being left unsaid in the reports, is whether Walmsley’s gender, as opposed to her experience, is the reason for the push for lower pay.

Walmsley has been a member of GSK’s Corporate Executive Team since 2011, and joined the GSK board of directors on January 1, 2017. Previously she was the chief executive officer of GSK Consumer Healthcare, a joint venture between GSK and Novartis , which was created in March 2015. Prior to that position she was president of GSK’s Consumer Healthcare group.

Walmsley is viewed as an executive who will continue leading the company consistent with Witty’s leadership. The Telegraph noted in January that in her nine years of leadership at GSK, the company had diversified into higher volume consumer staples like toothpaste and headache medications that have lower margins. An example is its $20 billion deal with Novartis, where GSK swapped its cancer drugs business with Novartis’ vaccines and consumer health portfolio.

Some investors have also expressed concern that Walmsley, who was with L’Oreal prior to GSK, will focus more on consumer products and less on research and development that could lead to newer, high-profit drugs.

GSK is the largest firm listed in the UK to have a female chief executive. Walmsley will be only the seventh woman to lead a FTSE 100 company.

TheStreet notes that the chair of GSK’s compensation committee is Urs Rohner, also the chairman of Credit Suisse. Hans Wijers, chairman of Heineken, also sits on the committee. In addition, he is on Heineken’s compensation committee.

TheStreet writes, “It could be an uphill battle for the company, currently votes on executive pay in the UK are non-binding. The government is trying to curb excessive executive pay and is consulting a range of possible solutions including adding a disclosure much like the Dodd-Frank pay ratio rule, which would show the difference between the CEO’s pay and that of the median employee.”

This apparently is a hot topic in London, as it is perennially on Wall Street. Recently, the UK government published a green paper on executive pay and corporate governance. Responses are still being evaluated, although many London investors and analysts expect it to lead to the publication of pay ratios and more binding votes for investors.

SkyNews wrote, “Shareholders such as Fidelity, Hermes Investments and Legal & General Investment Management have outlined a range of proposals for reforming executive pay, including ousting boardroom pay chiefs if fewer than 75% of investors back AGM pay resolutions.”

The company’s annual report, which is expected to have details of Walmsley’s compensation package, will be published in the second half of this month. It has also been noted that Witty received less compensation than many of his peers at Swiss and U.S.-based biopharma companies. GSK, typical of most companies, argues that in order to bring in top talent, they need to offer competitive pay.

GSK has issued a statement, “We are acutely aware of the need for a balanced and responsible approach to remuneration. We are in active consultations with shareholders on these matters and have been over several months. We have yet to submit our final proposals.”