GlaxoSmithKline boss Sir Andrew Witty's pay package more than doubled to £6.7m last year – but the drugs group reckons he remains underpaid and has awarded him a new deal which could generate up to £10.4m this year.
Details of Witty's 2011 pay, revealed in the pharmaceutical company's annual report, show his salary and incentives payout doubled from £3m to £6.7m in 2011 after his £1m salary was bolstered by a £2m annual bonus and a £3.7m payout from a three-year long-term incentive plan.
But the company said it had "identified a significant competitiveness gap" in the pay of the chief executive and had decided to bolster the size of his long-term incentive plan from a maximum of £5m a year to £6m – some 600% of his salary. According to the company's calculations, this could hand Witty £10.4m in 2012 if he meets all the performance criteria.
Separately the newly knighted Witty's basic pay is also to rise, by 4%, in line with other staff.
In the annual report, Sir Crispin Davis, the non-executive director who chairs the remuneration committee, said that the committee was "mindful of its responsibility to pay appropriately but not excessively" but had been concerned about the "competitiveness gap" for Witty when measured against a range of UK companies such as Anglo American, Vodafone, Barclays, Standard Chartered and HSBC.
A number of global pharmaceutical companies are also used for the comparisons and the company said Witty's pay was still in the bottom quartile when compared with his pharmaceutical peers, even after the pay rise.
The company, which was the first in the UK to have its pay policies voted down in 2003 over a pay deal for Witty's predecessor Jean-Pierre Garnier, said it already has shareholder approval for the changes to the chief executive's pay deal as the company's existing schemes permit 600% of Witty's salary to be handed out in share awards. In 2011 he received £3.7m of a possible £5m.
The annual report also shows that Julian Heslop, the finance director who was replaced by former banker Simon Dingemans, was handed £945,000 in "compensation for loss of office" which took his total pay for 2011 to £2.7m. Dingemans took home £1.6m while Moncef Slaoui, who runs research and development, received $4.8m (£3.1m).
Davis acknowledged that Witty's pay had "increased significantly" from 2010, which he said "directly reflects our pay for performance policy". He argued that last year GSK had recorded its best total shareholder return – 25% –since the company was created just over a decade ago.
"The committee is very aware of the sensitive environment surrounding executive pay at a time of real economic challenge," Davis added.
A spokesman for the company said Witty's leadership had been "fundamental" to the performance of the company in the last three years.
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