Tougher conditions for Glaxo chief's new contract

Shareholders in GlaxoSmithKline, the pharmaceuticals giant, are understood to have given their informal blessing to a new contract with the group's chief executive, Jean-Pierre Garnier, who has been under a constant barrage from investors over his so-called "fat cat" pay.

A Glaxo spokesman said yesterday: "We can confirm that we are involved in the final stages of lengthy and detailed consultations with shareholders, and we will make an announcement shortly."

M. Garnier's new contract will crucially cut his notice period from two years to one, and his bonuses will be subject to stiff performance criteria.

But it is believed that he will still be paid up to $10m (£5.7m) a year and will still be the highest-paid director of a company in the FTSE 100 index.

Glaxo concedes that M. Garnier's pay will be high by British standards. However, defenders of the new deal point out that his contract will be modest by the standards of top American executives and of executives in the pharmaceutical industry. M. Garnier lives in Philadelphia, Pennsylvania.

His basic salary will be $1.5m, as before, and he can qualify for a bonus of up to twice that, plus share options. But these bonuses and options will be tied to the growth of earnings per share and of total shareholder return, to be composed of dividends and share price performance. That return will be related to 14 other major international pharmaceutical companies.

Glaxo hopes that these provisions will head off a repeat of this year's annual meeting, when shareholder after shareholder berated M. Garnier for being too greedy.

Legislation came into effect this year forcing companies to publish details of directors' salaries and benefits in their annual reports, and allow shareholders to vote on them. A majority of Glaxo shareholders by number took the opportunity to vote against the company's remuneration policy.

Christine Farnish, director-general of the National Association of Pension Funds, said: "It is a positive development that the owners of companies are beginning to take their responsibilities more seriously. They have a key role to play in making sure UK plc generates value for everyone."

But 99 per cent of Glaxo's shares are held by institutions. Their informal approval is expected to ensure M. Garnier a smoother ride at the company's AGM in May.