NAPF weighs in on Garnier £5m pay-off controversy

The National Association of Pension Funds is set to weigh into the row over what would amount to a £5m "golden goodbye" for Jean-Pierre Garnier, the chief executive of GlaxoSmithKline.

The combative shareholder group has opened talks with the giant drug maker and signalled its concern at M. Garnier's two-year notice period and perks.

The development comes as a consortium of unions threatens to enter the bitter row over boardroom pay. Led by Amicus, the group plans to set aside some of their financial reserves to invest in shares, so gaining a voice to protest at "fat cat" practices at future shareholder meetings.

The NAPF said last night that it has "been in conversation with GSK" and was now considering whether to advise its members, who represent company pension funds which control about 20 per cent of the UK stock market, to vote against the pay policy.

The NAPF normally opposes any service contracts with more than one-year's notice. M. 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. He would also be entitled to bonuses worth up to £2.7m and his pension would be calculated as if he were three year's older than he really is. The total of these sweeteners, should he leave, is £4.85m with the ability to cash in on options on top.

The row comes after GSK earlier tried to double M. Garnier's annual pay and bonus package to £11m, although it was forced to back down after shareholders revolted.

Investors vote on M. Garnier's pay on 19 May, midway through what has become a bitter season of annual general meetings. With shareholders increasingly concerned over US-style pay in UK boardrooms, unions believe a renewed campaign against "fat cat" bosses will attract considerable support.

Derek Simpson, joint general secretary of Amicus, said: "In every workplace in Britain people are experiencing hard times. Everyone that is except some boards of directors who despite a fall in companies' share price and the need to impose compulsory redundancies on their staff have seen fit to award themselves big pay rises."

Amicus has put together five corporate governance tests that it expects companies to obey. If they do not, Amicus plans to use some of the £15m of financial reserves it jointly controls with the ISTC, the steel workers' union, the Transport and General Workers' Union and the industrial union, GMB, to gain an entry to their shareholder meetings.

The tests companies must pass include having a pension scheme with employer contributions. One in three companies have closed generous company pension schemes based on final salaries. They have moved to defined contribution schemes where payments by them as well as by employees is at their discretion.