Glaxo to Pay First Woman CEO Less, Cites Lack of ExperienceBy
Walmsley to earn 25% less than Witty in her first year at helm
Target bonus for Emma Walmsley capped at 100% of salary
Emma Walmsley, poised to take over as the first female chief executive officer of GlaxoSmithKline Plc, will earn about a quarter less than her predecessor Andrew Witty to reflect her lack of experience at the helm.
Walmsley will be paid an annual base salary of about 1 million pounds ($1.2 million), the London-based drugmaker said in its annual report. That compares to Witty’s pay of 1.15 million pounds last year. Her targeted bonus doesn’t exceed her salary, whereas Witty was given the opportunity to collect 125 percent of his pay through the bonus.
The lower compensation, for a woman who is breaking the gender barrier to become the first female to manage one of the world’s top 25 pharmaceutical companies, is likely to re-ignite a debate on the pay gap between the sexes. But it isn’t unusual that compensation levels change when a new CEO takes office as boards seek to link pay packages to the person’s level of experience and tenure.
“This is the moment to reassess the executive pay structure,” said Stefan Stern, director of the High Pay Centre, a think tank on top U.K. executive remuneration. “It’s good to focus on the contribution from the new person and it’s good to be tough and pay somebody less than their predecessor if their CV is at a different stage.”
Witty, who was also initially paid less than his predecessor, would have been CEO at Glaxo for almost a decade when he leaves at the end of the month.
Glaxo’s Chairman Phil Hampton, who as director at Anglo American Plc oversaw the capping of executives’ bonuses there, also heads a government-backed review on how to increase the number of female executives at the U.K.’s biggest 350 companies.
Pascal Soriot, who heads smaller U.K. drugmaker AstraZeneca Plc, got a 2.5 percent bump in his salary to 1.22 million pounds for 2017, and can earn up to 180 percent of his base pay as a bonus. He also gets long-term incentives that could be as much as 500 percent of his salary, compared with 550 percent for Walmsley. Soriot has been at the helm of the Cambridge, England-based company since 2012.
The compensation decision at Glaxo was part of a broader review of the U.K. drugmaker’s pay policy for top executives, which also resulted in demanding more share ownership and simplified the annual bonus system. The panel that sets pay was “particularly thoughtful about the quantum of the incentives” for the new CEO, according to annual report.
“We have been in active consultations with shareholders on these matters and have been over several months,” a spokesman for Glaxo said in an email on Tuesday. “Following feedback from shareholders, we have adjusted the remuneration policy.”
The decision at Glaxo comes amid increasing scrutiny of executives’ pay at U.K. companies following U.K. Prime Minister Theresa May’s campaign pledge to rein them in. Imperial Brands Plc in January dropped plans to give Chief Executive Officer Alison Cooper a raise of as much as 3 million pounds.
Walmsley’s task won’t be easy: the 47-year-old Oxford graduate inherits the challenge of piloting cutting-edge treatments for cancer and infectious diseases through clinical tests and onto pharmacy shelves to boost earnings and revive Glaxo’s shares.
Other recent CEO appointees in the industry hadn’t led a company before, including Soriot, Novartis AG’s Joe Jimenez -- who came from a consumer goods background, like Walmsley -- and Roche Holding AG’s Severin Schwan.
Walmsley, who takes over as CEO at the end of the month, comes from Glaxo’s consumer health business, known for brands such as Sensodyne, Panadol and Voltaren. She previously worked at cosmetics giant L’Oreal SA.
— With assistance by David Hellier, Anders Melin, and Alicia Ritcey
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