Glaxo Consolation Prize: A Seat On The Board

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boardroom.jpgHow should a company prevent the losers in the ceo succession race from leaving? Make them board members, of course. That’s apparently what Glaxo is considering now that Andrew Witty was tapped to succeed JP Garnier in June. The Glaxo directors will decide early next year whether to make David Stout and Chris Viehbacher directors in order to keep them from bolting, The Financial Times reports.

The move would also mark a shift in Glaxo’s corporate governance that could please shareholders, by increasing the proportion of executives to non-executives on the board to a third of the total, from just three of the 14 directors at present, the paper adds.

Discussions are already under way to find ways to retain Stout and Viehbacher through changes in their responsibility and remuneration, in a process designed to minimize any disgruntlement and reflect gratitude for their past work. However, Glaxo directors are keen to stabilize the drugmaker after the disruption caused by the long-running and high-profile succession race. Perhaps the pair can be placed on the compensation committee? Then they could help decide just how much to pay Witty.

Stalling a final resolution on appointing the two men as directors, however, would also allow more time in case – as many industry observers predict – either or both decide to leave. A recommendation to elect one or both of them as directors would be likely to pass through the nominations committee before passing to the full board, which next meets in December, the Times reports. But a final decision is more likely at a subsequent meeting. Glaxo refused to comment.

Stout and Viehbacher went through a grueling selection process for more than a year, involving interviews, assessments from within and outside the company, and completion of a special task. Stout, who runs pharma operations, is formally the executive to whom both Viehbacher, who heads US pharma, and Witty, responsible for Europe, currently report. All three sit on the corporate exec team chaired by Garnier.

Garnier, Julian Heslop, the cfo, and Moncef Slaoui, the chief scientist, are the only three execs who sit on Glaxo’s board, which has been chaired since the start of 2005 by Christopher Gent, who made the selection of Garnier’s successor one of his top priorities.

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