PHARMACEUTICALS firm GlaxoSmithKline has bowed to shareholder pressure and unveiled revised pay and rewards contracts for executives.

The group, which employs 1,170 staff in Barnard Castle, has scrapped two-year rolling contracts for executive directors that had sparked investor anger earlier this year over "fat cat" pay, replacing them with a one-year deal without compensation.

Links between pay and performance were strengthened while salaries were aligned with other international pharmaceutical companies.

The revised pay policy comes seven months after Glaxo suffered an unprecedented defeat at its annual meeting when shareholders voted against a multi-million pound pay and rewards package for executives.

A controversial "golden parachute" deal for chief executive Jean-Pierre Garnier caused a storm at the London meeting, which saw one of the biggest shareholder revolts against "fat cat" pay in British corporate history.

Glaxo said it had held extensive consultation with major shareholders, the Association of British Insurers and the National Association of pension Funds before finalising the new pay arrangements.

Chairman Sir Christopher Hogg said: "The new policy is clear and unambiguous and will be operated consistently. No other pharmaceutical company has adopted such demanding performance criteria."

The arrangements will soothe investor concerns over payments to executives.

Ahead of the annual meeting in May, shareholder groups hit out at the concept of two-year rolling contracts that could entitle Mr Garnier to about £5m in severance pay were he to leave the company.

They said executives could benefit from huge pay-outs even if they were forced to leave their posts for poor performances.

Pay deals for Glaxo executive directors will continue to comprise salary, an annual bonus and long-term incentives under the new remuneration agreements.

No changes would be made to the basic salary and bonus plan, but Glaxo announced an overhaul of its incentives scheme.

Emphasis on shares is tied to performance measures, such as earnings per share, rather than options that can be exercised when the firm is trading poorly.

The chief executive's pension is now an annual contribution of 15 per cent of his salary and bonus.

Executives will receive performance shares only if the company outperforms at least half its 15 largest pharmaceutical rivals over a three-year period.