Outlook: Executive pay

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A RIVAL broadsheet newspaper known for its left leaning tendencies yesterday ran the following headline; "Record pounds 93m package for boss of drugs firm". Technically, the story was correct, though the headline gave a somewhat misleading impression. Jan Leschly, the former professional tennis player who runs SmithKline Beecham, has indeed extracted that kind of value out of his company over the years he has been there - rather more, actually.

But these were not his earnings last year. The figure is arrived at by taking Mr Leschly's annual salary - which went down because of a lower bonus - adding in his accrued pension benefits, the value of his share options, and finally the value of his beneficial holding of shares in the company. Mr Leschly hardly needs defending in this column against headlines like this, nor should he be. SmithKline Beecham is a British company, but Mr Leschly lives in America and he and his executives pay themselves American style remuneration packages.

But it is a measure of how hysterical the debate over executive pay has become, that the rival newspaper claimed that even normally supportive City shareholders would be shocked and angered by this figure. The big number will anger many, but actually few City institutions will be among them.

The reason why Mr Leschly is worth so much more this year than he was last, is not because his pay has risen, but because SmithKline Beecham's share price has soared in the intervening 12 months, thus enhancing the value of his shares and share options. Unsurprisingly, most big City investors are relaxed about that, even though they think more value still might have been realised had SmithKline not backed out of the merger with Glaxo Wellcome.