Performance
measure Rationale Calculation methodology
R&D new
product
performance
Recognises the importance of R&D to future business
growth
One of the key indicators used to assess performance in the
pharmaceutical industry is the strength of a company’s product
pipeline. The R&D new product performance measure recognises
the importance of R&D to future business growth and has been
included as a measure in order to incentivise R&D performance
and drive the development and sales of new products. The
Committee believes that it is a robust and appropriate measure
as it reflects actual delivery from the pipeline and launch
excellence.
The target is based on sales of new products launched in the
performance period and the preceding two years.
The aggregate three-year revenue target should reflect growth
on historic performance.
Vesting may be reduced if insufficient progress has been made
during the performance period towards GSK’s target return on
R&D investment.
The Committee recognises that, from time to time, it may be
appropriate for the company to respond to an emerging pandemic,
as this supports GSK’s ethical responsibilities and values. The
impact of such revenue will be included, unless the Committee
considers that this did not add to shareholder value and provided
that underlying performance was sufficiently positive.
Adjusted free
cash flow
performance
Recognises the importance of effective working capital
and cash management
The use of cash flow as a performance measure is intended to
recognise the importance of effective working capital management
and of generating cash from assets for future value-creating
investments and for returns to shareholders.
Aggregate three-year adjusted free cash flow target.
Adjustments may be made for materially distorting items which
may include exchange rate movements, major legal and taxation
settlements and special pension contributions.
Relative TSR
performance
Focuses on delivery of value to shareholders
The Committee recognises that the delivery of value to
shareholders is a key priority. Relative total shareholder return
against a peer group of global pharmaceutical companies was
selected in order to closely align the interests of Executive
Directors with those of our investors.
The Committee regularly reviews the composition of the TSR
comparator group.
Relative TSR is measured over three years, using a 12-month
averaging period. TSR is measured in local currency