Abstract

Emma Walmsley, Chief Executive Officer (CEO) of leading pharmaceutical giant GlaxoSmithKline (GSK), had been facing some resistance from institutional investors who were questioning her leadership qualities and competency as a CEO. There had been some criticism regarding the decline in the profitability and share price of the company since she had assumed charge as CEO of the group. Despite her focus on research and development, the company had not been successful in coming out with a vaccine for the Covid-19 pandemic on time. However, Walmsley remained confident about her vision for restructuring the business of GSK with a future orientation and was trying to convince shareholders to secure approval for her restructuring plan. There were mixed opinions among different institutional investors; while some supported her, others were skeptical about her leadership qualities. Elliot Management, an activist investment company, had acquired a significant stake in GSK after which it intensified pressure on the management board to make changes in the restructuring plans and also to bring about a change in leadership. Despite the odds surrounding her leadership qualities, Walmsley geared up to address the investor meet scheduled to be held during the last week of June 2021. This case study can be helpful in discussing concepts like the principal agent relationship, agency cost theory, agency problem, and management risk.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The concept of Agency Cost and Agency Problem
• The Agency Cost theory
• Management risk and the factors that lead to principal and agency conflict in management
• The Agency Problem between the CEO of GSK and the activist investor of GSK

Keywords

GlaxoSmithKline; Emma Walmsley; Elliot Management; Activist Investment Company; Agency Cost; Agency Problem; Agency Cost Theory; Management Risk