GlaxoSmithkline says it has cut contracts for executive directors to one year from two, as it overhauls its remuneration rules after its salary practices came under fire from investors this year.
Europe's largest drugmaker, which had its remuneration policy voted down by shareholders in May, said it had strengthened the link between pay and performance as part of the exercise.
Under the pay deal, Chief Executive Mr Jean-Pierre Garnier could earn up to £5.7 million a year.
"We have listened carefully to the views of our major shareholders. The new remuneration arrangements are closely aligned with UK shareholder best-practice guidelines," Mr Christopher Hogg, chairman of the company, said this morning.
Shareholders were infuriated by US-based Mr Garnier's two-year contract - twice the British norm - and the generosity of pension arrangements for him and his wife.
The new arrangements leave the basic salary and bonus plan unchanged but place greater emphasis on performance shares - awarded when certain targets are reached - as opposed to share options, and subject all long-term incentives to rigorous performance conditions.
Two measures - earnings per share and total shareholder return - govern long-term incentive plans. Executives would be paid less than the median if their performance was below target and above median as performance improved.