City: Paul's vision

MANY years ago when Sir Austin Bide was still chairman of Glaxo, directors of the group's Italian subsidiary wrote to him saying they would resign if head office went through with plans to appoint a new managing director of whom they disapproved.

'What should I do about it?', Sir Austin asked his then chief executive, Sir Paul Girolami.

'Sack the lot of them,' Sir Paul replied without a moment's hesitation. And they did.

This true story was being much told at City lunch tables last week as Glaxo's chief executive of four years' standing, Dr Ernest Mario, became the latest victim of Sir Paul's legendary ruthlessness. Dr Mario's predecessor, Bernard Taylor, departed in very similar circumstances. Along the way, Sir Paul has also disposed of two or three finance directors.

In normal circumstances, Sir Paul would probably have taken the latest boardroom upheaval in his stride. Glaxo has become such a successful company under his rule that he could have done almost anything and the City would still have loved him for it.

Circumstances are not normal, however. Dr Mario's departure has coincided with an unprecedented period of confusion and concern in the City over Glaxo's future direction. Its shares have underperformed horribly over the past six months, undermined by rumours of dramatic shifts in strategy, criticism for overly aggressive marketing, and doubts about prospects for Glaxo's blockbuster anti-ulcer drug, Zantac. If Sir Paul's intention was to make Dr Mario a scapegoat for all this, it backfired badly. If anything, Dr Mario's departure has only heightened the concern.

Is this fair or is Sir Paul being misjudged? He certainly shares much of the blame with Dr Mario for the way Glaxo has been overhyped in recent years. It was after all Sir Paul, not Dr Mario, who said two years ago that Glaxo's three most promising new products would by mid-decade be as successful as Zantac, a prediction that now looks like little more than a pipe dream. But if Dr Mario had got his way, Glaxo would have embarked on some totally inappropriate strategy of acquisition to take it into the over-the- counter drugs market. Such a course might have plenty to commend it, but it is not the formula that has made Glaxo a success.

Glaxo is a research-based prescription drugs company and Sir Paul is making it abundantly clear in the wake of Dr Mario's departure that he is going to keep it that way. The City would be unwise to push it down alien avenues. Why not just let Glaxo get on with what it is good at? As for Sir Paul, he surely deserves the benefit of the doubt after all he has achieved. Dr Mario is a great enthusiast but he was never at ease in British corporate life; he never really moved to London in the first place, preferring to keep his main home in the US. It was he who became the odd one out at Glaxo, not Sir Paul.

Like most great entrepreneurial achievements, Glaxo is largely one man's creation, one man's vision. While Sir Paul is still there, there is never going to be a real challenge to his authority. Nor should there be, unless he begins to foul up on a major scale. Given his track record, there's not much reason to think he is going to do that.