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LONDON (Alliance News) - GlaxoSmithKline PLC Chief Executive Andrew Witty took a hit to his annual bonus for 2013 as a result of ongoing investigations in China, although his total pay for the year still rose 63% as the company got six products approved and five additional regulatory filings completed.
GlaxoSmithKline chose to raise the salaries of its executive directors by 2.5% for 2014, which it said was consistent with the average salary increase for other UK and US employees across its business. It did not increase annual and long term incentive opportunities for its executive directors.
The company is being probed by Chinese authorities following allegations that senior Glaxo executives had been involved in payments of up to USD500 million to doctors and hospital executives over the past six years. The allegations have led to the arrest of four Glaxo managers, with several more under house arrest. At the time of reporting its full year results Glaxo reiterated that it was too early to estimate the financial hit from the investigations.
Witty told journalists at that time that while Glaxo's Chinese business had begun to stabilise, the timing of the conclusion of investigations into its selling practices in the country was in the hands of the Chinese authorities.
"The ongoing investigation by authorities in China was also considered by the Committee," Chairman of the Remuneration Committee Tom de Swan said in the company's annual report. "Both Sir Andrew and the Board are mindful of the impact this issue has had on the reputation of the company. As a result, the bonuses awarded for 2013 were lower than they otherwise might have been."
Still, Witty's total remuneration for the year rose to GBP7.2 million, from GBP4.4 million in 2012. His performance bonus more than doubled to GBP1.88 million, from GBP905,000, and he saw a rise in the total value earned from long term incentive awards. The maximum bonus Witty could have received is two times his base rate of salary, a total of GBP2.12 million.
Chief Financial Officer Simon Dingeman's pay rose to GBP3.3 million, from GBP1.2 million, also benefiting from higher long term incentive awards, and Chairman of Global Research and Development and Vaccines Moncef Slaoui's pay rose to GBP8.4 million, from GBP6.6 million.
Last month, Glaxo reported only a slight increase in profits for 2013. Pretax profit rose to GBP6.65 billion, from GBP6.60 billion in 2012, as revenues rose to GBP26.51 billion, from GBP26.43 billion. Earnings per share rose to 112.5 pence, from 91.6 pence.
The bonus of top executives is decided by the company's financial performance, as well as progress on drug development.
"Andrew Witty?s bonus reflects GSK?s very strong performance in 2013 which included receiving the highest number of product approvals of any company, meeting the top end of our financial guidance and delivering the best total shareholder return since the formation of the company with more than £5billion returned to shareholders," a spokesperson for Glaxo said.
"His bonus has been reduced from the maximum possible as both Andrew and the Board are mindful of the impact the investigation in China has had on the reputation of the company," the spokesperson said.
Glaxo said it has made changes to its long-term incentive plans to respond to concerns raised by investors.
Glaxo is removing the business diversification measure from its Performance Share Plan & Deferred annual Bonus Plan matching awards from 2014 onwards. Remaining measures will have additional weighting.
It also said it had extended time horizons by introducing an additional two-year period for Performance Share Plan awards for executive directors to be made from 2015.
"During 2014, the Committee will continue to keep executive remuneration arrangements under review. We will also continue our regular dialogue with shareholders and will hold our annual meetings with GSK?s largest investors later in 2014 to listen to their views and feedback," it said in the company's annual report.
Shares in Glaxo were trading down 0.5% at 1,663.32 pence Monday afternoon.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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