How the cat lost the cream at Britain's biggest drugs firm

Boardroom Pay: Shareholders at annual meeting make history by rejecting 'golden parachute' package for GlaxoSmithKline chief executive

The wait for the puff of white smoke from the Queen Elizabeth II conference centre, a few steps from Parliament, was not meant to be quite so long, but it was clear from the beginning of yesterday's momentous meeting of GlaxoSmithKline shareholders that every vote was going to count.

Shareholders had long since exhausted the company's coffee and biscuits and headed home, but they would have turned on the news when they got back. It was too late to make the usual announcement to the Stock Exchange but hurried mobile phone calls soon spread the news among investors and union campaigners who had combined to deal a blow against boardroom greed. Derek Simpson, joint general secretary at the Amicus union, was jubilant, declaring "a new era of corporate accountability".

This was probably the first time there has been a sense of genuine excitement at the outcome of a vote at an annual shareholder meeting. Normally those who attend know that, with depressing regulatory, the institutional shareholders will have delivered sackfuls of positive proxy votes in favour of the board the weekend before. Not so yesterday.

The meeting had been billed as the big showdown of the annual season of shareholder meetings ­ everyone had their soundbites ready. "Jean-Pierre Garnier, the chief executive, isn't a fat cat, he's something else. He's a cat burglar, robbing us blind,'' said Tony Hayes, a member of Amicus made redundant by GlaxoSmithKline after 32 years' service.

John Cruickshank asked if a golden parachute was really the right metaphor for these sorts of potentially enormous payments for failure. "If you leap off the gravy train what would you use?'' One shareholder even had a bag of peanuts to taunt Mr Garnier over a remark he once made about getting monkeys. The board's critics generated warm applause from the 900-strong audience.

In the end, Jean-Pierre Garnier, the chief executive, suffered his second humiliation at the hands of shareholders in barely six months. In November, the City's fund managers had, behind-the-scenes, told GSK that they would not support a plan to double Mr Garnier's pay to £12m. Yesterday's defeat ­ by 49.3 per cent to 50.7 per cent, with a large number of abstentions ­ was a more public slap, with institutions such as Standard Life and Axa coming out publicly against the massive potential reward for failure.

Sir Christopher Hogg, GSK's chairman, knew the tone to strike was one of contrition. He would have been "blind and deaf'' not to have registered shareholders' concern, he told the meeting. And in defeat, he said: "There are elements of our senior level remuneration package which do not accord with what is regarded as best practice by some shareholders. That is something that the board is aware of."

No heads will roll in the short term, but the City has put a big question mark over Sir Christopher's chairmanship.

Mr Garnier declared himself "flexible" on pay, but still put a robust case in favour of pay packages that compare with those on offer in the US. And he faced down many shareholders' grumbles that he has chosen to stay in Philadelphia rather than live near GSK's headquarters, west of London.

"The chief executive resides in the US but I spend so few days at home that the dog is barking at me when I come home," Mr Garnier said. "The reason it is important for key executives to reside in the US is new technology started in the US and the US market is 60 per cent of our business."

A shareholder replied: "This is a British company. If you want a US package you know what to do."