In a world where women consistently earn less than men, and very few run the biggest corporations, getting paid less than a man might be a cause for concern.
And so it has been with reaction to the news that Emma Walmsley, the new CEO of UK pharmatecuial behemoth GlaxoSmithKline, will be paid 25% less than her predecessor, Andrew Witty. In this case, it shouldn’t be.
There are sound reasons why Walmsley, who will make just over £1 million ($1.23 million) in base salary, is being paid less. High among them is that she has far less experience than Witty. Witty, who retires at the end of the month, was CEO of Glaxo for almost a decade, while this is Walmsley’s first stint at the helm of a company. Previously, she ran Glaxo’s consumer products division.
Just as significantly, Walmsley takes over as Glaxo’s board is overhauling its executive compensation policies. The company has lowered the maximum bonus available to its CEO, and now requires its chief executive to own more shares, to help ensure they act in the best long-term interest of shareholders.
Glaxo pays heed to the views of its investors, who haven’t had much to celebrate in recent years. While the company has gotten high marks for its socially-responsible practices, like slashing drug prices in Africa, its share performance has been middling and new drug launches have failed to excite. The board slashed Witty’s bonus in half two years ago after the company’s profit declined.
Some shareholders argued Walmsley’s starting pay should have been even lower, Sky News reported.
Companies across the UK are becoming more sensitive to calls to rein in executive pay. In an advisory vote last year, BP shareholders rejected a £13.8 million package for the oil company’s CEO, and in November, UK prime minister Theresa May proposed new rules to curb runaway pay, such as giving shareholders a binding vote.
Walmsley may be the short-term victim of Glaxo’s new-found enlightenment, but by listening to investors, the company is doing the right thing. And if she can turn the company’s share price around, Walmsley will be richly rewarded.