GSK's Hogg attempts to stave off rebellion by institutions

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The Independent Online

Sir Christopher Hogg, the chairman of GlaxoSmithKline, is warning institutional shareholders that a vote against its pay policy would be a destabilising blow against the company.

In a last ditch attempt to stave off a big rebellion, shareholders believe Sir Christopher is attempting to turn the vote on the remuneration report into a vote of confidence in the board.

Some have been led to believe that there could be high profile resignations – perhaps from the remuneration committee – if the policy is voted down, although sources at GSK played down the speculation.

Shareholders have been infuriated at a pay policy that provides bumper severance packages for Jean-Pierre Garnier, the chief executive, and John Coombe, the finance director. A two-year notice period, a pension top-up and extra share options could net Mr Garnier up to £23m if he is forced out.

The company insists no decisions have been taken as to how the board will react if the remuneration report is voted down on Monday. Insiders believe Sir Christopher would attempt to ride out the storm by pointing out that a major review of executive pay and a boardroom reshuffle have already been promised. But as the vote goes to the wire, the chairman and investor relations staff have contacted UK shareholders to attempt to persuade them to back the policy.

One insider said: "We are phoning up, asking if shareholders are aware that the Deloitte & Touche remuneration review is already going on, and asking why they are voting against. A lot of shareholders don't like to vote against the management and possibly a vote against the remuneration report could be construed as a vote against management."

Some fund managers are hoping to inflict a blow at GSK in part to discourage corporate excess elsewhere. The drug maker has fallen foul of corporate governance issues twice in six months, having been forced by shareholders last November to ditch a plan to double Mr Garnier's pay package to £11m.

A poll by The Independent found that more than half of GSK's top 10 UK shareholders have already voted "no" to its remuneration report. Proxy votes will be totted up over the weekend, but many fund managers are planning to attend the London meeting and are able to reverse their votes on the day.

Sir Christopher may have some success in his appeal to traditional distaste for voting against management. One top 10 shareholder said it would almost certainly vote for the remuneration policy to avoid humiliating the board."We know they are going to get a kicking, and we don't particularly feel we want to join in. I suppose you could ask why we should support a policy that GSK, through the appointment of Deloitte & Touche to review their remuneration, has shown it does not even support itself. But by pulling the proposals in November, they have shown they are listening."

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