Investor Elliott strikes at GSK management

US investor Elliott Management has called for GlaxoSmithKline to appoint a new board which can decide whether Dame Emma Walmsley is the best person to lead the business into the future.

The drugs giant is set to be split next year into a consumer healthcare division and the so-called “New GSK”, which includes its pharmaceuticals and vaccines arms.

GSK has promised to appoint more directors with biopharmaceuticals and scientific experience to the board of New GSK; however Elliott has urged it to do this before the split.

This would allow the board to choose the “best possible leadership” for the two new companies, Elliott said, adding that it has a list of potential candidates it is “prepared to share”.

“To be clear, we believe that existing management should remain in place until a decision is made regarding future leadership,” the investor said.

But it added: “Elliott strongly believes that the future CEOs of New GSK and CH (consumer healthcare) must have the skillsets and expertise to match their respective tasks at hand.”

The comment was widely interpreted as a question about current chief executive Dame Emma.

Her background is in consumer healthcare – she was the boss of that division before becoming GSK chief executive – rather than pharmaceuticals.

Last week Dame Emma said she would not talk about “all the things I’m not”, which others have already covered.

“Let me tell you what I am… I am a change agent, I am a business leader, and I am very excited about the new plans for a New GSK that we’re laying out today,” she said.

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Although it was a poorly kept secret, Thursday’s letter is the first time that Elliott has publicly said it has a major stake in GSK.

It further called on the company to link a “substantial” part of managers’ pay to financial targets.

This could include revenue growth targets, but also research and development milestones which will benefit shareholders in the long run, Elliott said.

The investor said GSK should not rule out selling its consumer healthcare division instead of management’s plan to hand it over to shareholders as a new listed business.

Money from a sale could pay down debt or buy back shares from investors, Elliott added.

“If such opportunities arise in the next few months, we urge the board to evaluate them impartially against the default spin and sell-down plan announced in the investor update,” it said.

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GSK said it is already working towards fixing many of the issues that Elliott raised in its letter.

“We set out on 23 June an ambitious plan to deliver a step-change in performance and realise significant value for GSK shareholders over the next decade,” it said.

“We believe our shareholders are supportive of this strategy, and that they are focused on GSK executing on it without distraction or delay. This is our clear priority.

“We will respond to Elliott’s letter more fully in due course.”