Mario receives up to 3m pounds leaving Glaxo

Click to follow
The Independent Online
DR ERNEST Mario, Glaxo's chief executive, yesterday quit the giant drugs company amid deep disagreement over strategy with the chairman Sir Paul Girolami, and is set to receive a pay-off of up to pounds 3m.

Dr Mario, who joined the board of Glaxo in 1988, and earned just under pounds 1m last year, was employed on a service contract under which Glaxo had to give him three years' notice.

Sir Paul said he would be paid the full amount to which he was entitled under the contract. 'We will observe his entitlements under the contract and no more.'

This, he agreed, could be up to pounds 3m. 'In substance that's right. You just have to suck your teeth.'

If so, it will be one of the largest such payments in UK corporate history. Bob Horton, BP's chairman, is understood to have recently received a pounds 1.5m pay-off following his resignation in July, while last year Sir Ralph Halpern, the former head of Burton Group, received pounds 2m and Peter Scott, ex-chairman of Aegis, the media buyer, received pounds 2.2m.

But Sir Paul observed that, since Dr Mario was contractually entitled to the money, the only criticism that could be levelled against such an arrangement was that Glaxo should not give three year contracts. Most of Glaxo's top executives are on a similar notice period.

Dr Mario's resignation forms part of a broad restructuring of the group's top management as Sir Paul, the man widely credited for Glaxo's dramatically successful growth in the 1980s, reasserts his control.

Dr Richard Sykes, previously head of research and development, will take over Dr Mario's titles of chief executive and deputy chairman. But a new post, chief operating officer, has been created for Dr Franz Humer, previously in charge of the company's commercial policy.

The move has been interpreted as in effect splitting the chief executive function, although Dr Humer will report to Dr Sykes. In addition, while Dr Sykes will be directly responsible for the US, Dr Humer will look after Europe.

In addition, John Hignett, responsible for Glaxo's pounds 1.5bn cash pile, will report directly to Sir Paul. The cash pile has also been the subject of disagreement, with Dr Mario favouring its use for a big buy and Sir Paul preferring to return the bulk to shareholders.

Sir Paul said the money was unhelpful for acquisitions and led to Glaxo taking its eye off the ball 'a bit'. 'We're going to have to deal with it,' he said. The suggestion is that Glaxo will probably opt to shrink its cash pile by paying a special dividend.

The reorganisation reflects profound disagreement between Dr Mario and Sir Paul about strategy. Sir Paul wanted to stick with the group's traditional approach of concentrating on the research and development and sophisticated marketing of high-priced, prescription-only drugs.

Dr Mario is understood to have favoured expanding into over-the-counter drug sales. This he saw as the best way to meet the two challenges currently facing the drug industry, the loss of patents - the patent on Zantac, Glaxo's best-selling anti-ulcer drug - and government moves to restrict the cost of prescription drugs.

In a prepared statement Dr Mario said that it was inevitable in a company as complex as Glaxo that differences would arise from time to time over the running of the business.

'It is because of such differences that I have decided today to resign,' he said. While he left with 'a certain measure of regret and sadness' his resignation had been made in an 'amicable and constructive' manner, he added.

Uncertainty about Glaxo's direction has affected its share price, which has also suffered from President Clinton's plans to control US healthcare costs. Glaxo, briefly Britain's biggest company last year, has seen its market capitalisation shrink by more than a fifth.

View from City Road, page 33

(Photograph omitted)

Comments