The headlines in the U.K.tell a tough story for GlaxoSmithKline Chief Executive Officer Andrew Witty. His compensation plunged many, many (pick a currency) pounds, dollars, euros, yen, renminbi and deutsch marks lighter in 2012.

  • “Sir Andrew Witty’s pay halves to £3.9m amid weak European performance”
  • “Performance pay package halved for GSK CEO”

The slashing of total “remuneration” as GSK’s (NYSE: GSK) just-published 2012 annual report shows just how drastic the cuts were.

Witty, who became CEO in May 2008 and is aggressively pushing what he calls a “change program” to drive down expenses while shifting corporate direction, saw his pay package drop to about $5.7 million from $10.2 million, some 45 percent. (The pound is converted to some $1.51, citing today’s exchange rate.)

His salary and bonus declined so much that Dr. Moncef Slaoui, head of research and development and vaccines, is now the highest compensated executive at around $7 million. Yet his financial package also declined a bit.

Chief Financial Officer Simon Dingemans didn’t escape. He took a big, big hit. His package fell to some $1.8 million from $2.4 million.

The report from the international drug giant, which operates its North American headquarters in RTP, cites falling sales in Europe as a driver behind the decrease.

The Telegraph in London, quoting unnamed sources, adds: “People close to the company last night said Sir Andrew’s remuneration had suffered as a result of a 7pc sales drop in Europe over the year; worse than the company expected.”

As a result, Witty’s bonus was slashed more than 50 percent to $4.2 million.

His base pay did increase slightly (about $50,000) as did “other benefits.”

The CFO’s bonus fell to $510,000 from $1.2 million.

Kind Words for His Performance

However, Witty received considerable praise in the report.

“Sir Andrew showed strong leadership and resilience in a challenging operating environment, as conditions in Europe deteriorated, to secure flat year on year sales (excluding disposals of over the counter (OTC) products), with growth across Emerging Markets, Asia Pacific, Japan (excluding Cervarix) and the Consumer Healthcare business, adjusting for the disposal of the non-core OTC brands. Positive cash generation from operations and disposal of non-core OTC products enabled £6.3 billion to be returned to shareholders (dividends of £3.8 billion and shares repurchased of £2.5 billion).

“The ongoing US Federal Government investigations with the US Department of Health & Human Services were concluded with the signing of the Corporate Integrity Agreement.

“Sir Andrew strengthened the core business through acquisitions and investments, completing three significant transactions (HGS, Shionogi and Theravance) to increase GSK’s share of key future growth assets.During the year, Sir Andrew also continued to advance the Group’s leadership position on corporate responsibility issues, including action to increase the transparency of our clinical research and to improve access to our medicines. GSK was again ranked in first position in the prestigious Access to Medicines Index.”

CFO Is Praised

Dingeman was praised in the report for cost-cutting, tax reduction and other efforts even though his compensation declined.

“One of Simon Dingemans’ main objectives for 2012 was to implement further Group-wide cost control and financial efficiencies,” it says. “These were delivered, contributing significantly towards 2012 overall performance and enabling GSK to maintain its core earnings per share on a constant currency basis. He also achieved reductions in our effective core tax rate to 24.4% (2011 – 25.9%), meeting our targeted rate of 25% two years ahead of expectations.”

R&D Head Now Top Paid

Just how important is research and development to GSK’s future?

Slaoui, the R&D and vaccine head, earned the most pay as Witty’s bonus fell even though Slaoui’s total package declined nearly 6 percent to about $7 million.

His base pay is higher than Witty’s (see chart with this report) and his bonus dipped to around $4 million – but he fared much better than Witty. His bonus slipped much less, declining to some $4.6 million from around $5.2 million.

The report praised Slaoui’s contributions:

“Dr Moncef Slaoui led R&D and Vaccines through a very successful year. R&D exceeded the pipeline development and value targets for the year (as detailed above). He also designed and implemented, with effect from January 2013, a new integrated way of working between R&D and other parts of the business to create a strong, global product launch capability for GSK’s pipeline of new medicines.”

The full report can be read online.

[GSK ARCHIVE: Check out more than a decade of GSK stories as reported in WRAL Tech Wire.]