GlaxoSmithKline falls to bottom of good governance survey

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A recent bribery scandal and excessive pay policies have sent pharma giant GlaxoSmithKline to the bottom of the Institute of Directors' (IoD) corporate governance survey.

The third annual Good Governance Index (GGI) ranked GSK as the worst company among London's largest listed firms when measured against 47 indicators in five broad categories including board effectiveness, audit and risk/external accountability, remuneration, as well as shareholder and stakeholder relations.

IoD deputy chairman Ken Olisa highlighted that GSK has had "lots of issues" in recent years, including a scandal that allegedly saw it make illegal payments to doctors in China in a bid to boost sales, as well as controversy over executive pay after former chief Sir Andrew Witty saw his salary surge despite a drop in earnings.

GlaxoSmithKline chief executive
The pay package for new GSK chief executive Emma Walmsley was lower than her predecessor's following an internal review (PA)

However, Mr Witty's successor Emma Walmsley has since been handed a total pay package worth around 25% less than her predecessor's total following a remuneration review.

Having been given "granular" data on the reason behind their ranking, Mr Olisa said the GSK board should "go through all of the factors... and say, do we agree with what the IoD have said and if we do agree with it, what are we doing about fixing it? Because that's really what we're trying to make happen here."

A spokesman for GSK said: "We take our responsibilities with regard to corporate governance very seriously particularly in areas such as executive pay, board governance, employee diversity, audit management and relations with external stakeholders.

"While there is always more we could do, we don't recognise the conclusions of this work and will seek to understand the findings fully."

Other firms at the bottom of the ranking included Carnival, G4S, Anglo American and ASOS.

Drink giant and Guinness owner Diageo was dubbed the best governed blue chip firm, followed by Aviva, GKN, and Barclays.

Jes Staley
Barclays chief executive Jes Staley has apologised for breaking rules designed to protect whistleblowers (Barclays/PA)

The UK banking firm ranked highly despite a recent scandal that saw chief executive Jes Staley face a regulatory investigation after he breached rules by trying to identify an internal whistleblower.

While the Good Governance Index counts employee protection and whistleblowing policies among its measures, Mr Staley's misconduct fell outside of the cut-off period for the IoD's report.

Mr Olisa admitted that Barclays' ranking next year could be affected by the way the company handles the scandal.

"Next year, it will be (a question of) how the board and the audit/risk committee deal with these things," he said.

"If the chief executive is sanctioned by somebody but stays in post and has his pay quadrupled, that wouldn't be a good thing from a GGI perspective," he added.

The IoD deputy said it was important to remember that the ranking is about how companies react to mistakes, not about whether they are made in the first place.

"You can't stop things going wrong inside organisations. Governance is about how you control your organisation when those things happen," he said.

"No organisation can be perfect."