Prepare a persuasive speech to help, Dr. Grainer seeks to persuade the shareholders that the proposed executive compensation plan is more fair and equitable. At GSK, comparative performance was previously measured by reference to the FTSE 100, but the Committee concluded that the measurement of performance against the performance comparator group of [international] pharmaceutical companies...would provide a better assessment of the company's performance.

Using the case study below:

After November 2002, GSKs stock price continued to fall. On February 12, 2003, J.P. Garnier faced the press stating that GSK had posted a 6% rise in 2002 post-tax profits that were now at a level of 6.5 billion. At this press conference, referring to his proposed pay deal, Garnier revealed that it was unfortunate the secrecy was broken. He defended the proposal stating that, There is a reality out there - if we want to keep our best executives and our best scientists we have to pay competitively.¹

Investor pressure continued to mount on J.P. Garnier in the light of continued poor stock price performance. The debate moved toward the nature of the exit clauses in his contract. This was estimated by the Pensions Investment and Research Consultancy to be in the region of 22 million, a figure that GSK disputed, since it included some 7 million of already vested share options. The remaining part of the exit package was made up of 15 million of cash and other benefits. By early May 2003, GSK was facing the realistic possibility of a shareholder revolt over its executive remuneration proposals.

By May 9, 2003, in an attempt to ward off the shareholders ire, Sir Christopher Hogg, Chairman of GSK, wrote a letter to all major shareholders saying that the board had registered the shareholders deep reservations.² GSK planned to thoroughly examine executive pay by hiring Deloitte and Touche to conduct a review of its pay policy.

By the day of the Annual General Meeting on May 19, 2003, speculation was still rife of the remuneration proposals being rejected. Ultimately, GSKs backtracking had no effect and the executive remuneration package was rejected with a backing of 50.7% of the shareholders, a further 10.3% of shareholders abstained in this vote. Furthermore, 17% of shareholders voted against J.P. Garniers re-election onto the board.