EDITORIAL: GSK's nightmare is a wake-up call

Among the many victims of the shareholder revolt at this week's GlaxoSmithKline AGM were that company's reputation for strong corporate governance, CEO Jean-Pierre Garnier's reputation for thrift and the reputation of institutional investors as the indulgent doormats of the business world.

No More was the very clear message.

The Maitland Consultancy, which this week replaced Financial Dynamics as GSK's PR adviser, will have a job on its hands turning around the perception of GSK as a company that places management greed over investor concerns.

Everything - from the shiny Mercedes limos that spirited directors away from the AGM to the trade union activists dressed up as cats and pigs - screamed of a knack for bad publicity that urgently needs addressing.

But all the media nous in the world won't save major corporations if they fail to sort out the core problem: paying people stupendous amounts for failure looks bad for one reason - it is bad.

Picking out the winners is no less instructive. For the institutional investment community, this is a victory that dwarfs even that of, say, the revolt that forced Stelios Haji-Ioannou to relinquish the chairmanship of easyJet. Despite the narrow rejection of the CEO's package only being an advisory vote, the reputational risk implicit in ignoring such clearly expressed investor opinion should deter the most thick-skinned of executives.

Among those who have campaigned most vigorously against rewarding failure are the Association of British Insurers and the National Association of Pension Funds. After a PR campaign of several years, the ABI's head of investment affairs Peter Montagnon appeared magnanimous in victory this week. He said the best case scenario would be if the next AGM season saw firms spare themselves a repeat of GSK's PR nightmare: 'They should attend to remuneration with an eye on corporate governance and the risk to their reputations.'

The other major PR winners are the unions, which have both succeeded in shining the media spotlight on fat-cat pay, and positioned themselves as being on the side of ordinary working people. Their strategy may have been to inflict long-term damage on capitalist excess, but their tactics were refreshingly simple. As Amicus-AEEU's savvy PROs understood all too well, every TV news editor loves to see adults dressed up as animals.

But above all, this is a watershed moment for those in IR. The value of open and timely communication to those who own the company is never more clearly illustrated than when the process breaks down - when a company fails to take the investors with it down a particular policy route. IR practitioners, corporate and non-profit PROs can all benefit from GSK's pain.

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