Garnier in spotlight again as ABI objects to two-year notice period

Jean-Pierre Garnier, the chief executive of GlaxoSmithKline, is set to walk into another storm over pay, as shareholder groups challenge a potential pay-off that could net him £5m if he leaves the company.

The Association of British Insurers is unhappy with Mr Garnier's two-year notice period and severance package. The association, whose members control about 20 per cent of the UK stock market, could advise institutional investors to vote against Mr Garnier's re-election or reject the company's entire remuneration policy.

The new concern increase the chances of an embarrassing showdown at GSK's annual shareholder meeting, scheduled for 19 May. Investors were angered in November last year when the company tried to push through a new policy that would have doubled Mr Garnier's potential shares and bonus package to £12m. GSK had to back down after a shareholder revolt.

It is also the second corporate governance headache for Sir Christopher Hogg, chairman of GSK and Reuters, where the chief executive's remuneration came under fire.

Manifest, the corporate governance voting adviser, said: "Bearing in mind Sir Christopher's position as chairman of Reuters, and his support there of Tom Glocer's remunerative arrangements, the close scrutiny of pay at GSK is likely to continue." The ABI says that Mr Garnier's two-year notice period breaches its guidelines, which argue for contracts with one-year's notice or less. Mr Garnier, who was paid a salary of £967,000 last year, would receive a lump sum of £1.9m if he was asked to leave. Manifest calculates he would also be entitled to bonuses worth up to £2.7m, a pension top-up and other sweeteners. The total severance package would be £4.85m with the ability to cash in options on top.

An ABI spokesman said it would consider the arrangement closely before advising its members. He said: "The details that have emerged from GSK indicate that if the chief executive's contract was terminated the payment for severance would be very rich indeed."