One fund manager said: "The directors already stand to make a lot of money and we would be concerned if they also forced through a large rise in salaries following the deal."
The executive directors could net almost pounds 35m between them and Glaxo directors could receive a huge pay rise as they earn significantly less than their SmithKline counterparts.
While most fund managers welcomed the merger and recognised it would have buoy up the companies' share prices in the short term, some questioned the long-term prospects for the combined group.
One institutional shareholder said: "This looks more like a defensive move. Research and development costs are rising all the time. With both companies looking over the precipice this move will underpin earnings for the next few years ... but after that the outlook is negative."
Another fund manager said: "Margins could be whittled away by competition and any cost savings may have to reinvested in the business."
These concerns prompted several large institutions to sell shares yesterday, pushing Glaxo's price down 56p to 1,927p, and SmithKline's price was down 14.5p to 830.5p.
Meanwhile, MSF, the science trade union, claimed workers' rights had been ignored and argued the companies were in breach of European law on employee consultation.
Roger Lyons, general secretary of MSF, said management had a "clear and demonstrable" obligation to talk to union officials about the employment implications of the merger. Mr Lyons estimated that up to 10,000 jobs might be at risk because of the "overlap" between the two companies.
His protests prompted a letter from the head of the City's Panel on Takeovers and Mergers in support of its contention. In a letter to MSF, Alistair Defriez, director-general of the panel, confirmed that voluntary codes on secrecy did not over-ride European laws insisting on consultation, provided the talks were held in secret. The MSF leader pointed out that quoted companies had often cited City rules when withholding information and argued the letter therefore constituted a "watershed" in employee relations.
The MSF general secretary has also written to Margaret Beckett, President of the Board of Trade, expressing his concern over the potential loss of key scientific expertise. He estimated that the companies accounted for around a fifth of the jobs in research and development in the private sector in Britain.
Mr Lyons said his union did not oppose the merger, but "the case for it has not been made". On the issue of consultation Mr Lyons said employees had been treated like "serfs" and that it was time the rights enjoyed by people as citizens were extended to the workplace.
A Glaxo spokesman said all figures for potential redundancies were "pure speculation". Detailed work had to be completed before it was finally decided to press ahead with the merger.
The spokesman said his company had a policy of "open and comprehensive" communications with employees and that information would be made available as soon as possible.
Outlook, this pageReuse content