One of the best things about a democracy is getting to vote out representatives who let us down. As shareholders, it's much harder to express dissatisfaction in management without just selling shares, since you may really like the business despite management.  But some investors might wish they could vote out the CEOs of these two companies. 

Shares of GlaxoSmithKline (GSK 5.84%) and Bayer (BAYR.Y -6.89%) have lagged the market for years, and investors have a few good reasons to be fed up. The companies are making moves to transform their businesses, but are the benefits anywhere close to being realized?

Man at his computer looking frustrated in front of screens showing stock charts.

Image source: Getty Images

GlaxoSmithKline

Emma Walmsley started her term as CEO of this 19-year-old company at the beginning of 2017. She joined the company after spending 17 years at L'Oreal (LRLCY 0.18%).

Since taking the helm, sales have increased 23% to 34.3 billion pounds ($45.2 billion). But that growth hasn't benefited investors -- shares have been flat over her nearly four-year tenure. But there is a strategy to get the shares moving in the right direction. The company has 40 drugs in development along with 18 vaccines, and is streamlining its business to focus on research-based products.

In 2019, GlaxoSmithKline's consumer health division was combined with Pfizer's. For now, GlaxoSmithKline retains a 68% ownership interest. The entity is expected to be spun off as a stand-alone company near the end of 2021. The focus on scientific discovery is starting to pay off. In the second quarter, the company received approval for its ovarian cancer drug Zejula, as well as Rukobia, its HIV treatment.

More good news followed in the third quarter for GlaxoSmithKline with approvals for asthma drug Trelegy and Blenrep, the company's treatment for multiple myeloma. Despite the progress in achieving new approvals, management still projects full FY earnings to be at the low end of its guidance for a decline of 1% to 4%.

Without any failures in the pipeline, and with the reorganization under way, investors should give Walmsley more time to see her strategy -- investing in scientific discovery in lieu of stagnant businesses -- through. It has taken a few years for the pieces to start falling into place for growth, but the clock is ticking.

Bayer

In May 2016, Werner Baumann began his tenure as CEO of Bayer, the German conglomerate focused on healthcare and agriculture, after 26 years at the company in various finance and administrative roles around the world. Only weeks later, the company would offer Monsanto a 44% premium in what is now regarded as one of the worst acquisitions in corporate history. With Monsanto's genetically modified seeds cutting into Bayer's sales of herbicide, it made strategic sense to take out the maker of 26% of the world's seeds. Now, Bayer is investing in the healthcare segment, spending billions to catch up in the field of genetic medicine.

The Monsanto deal was the largest all-cash buyout on record, and four years later, after losing multiple lawsuits over Monsanto's controversial Roundup weed killer -- which contains a substance the World Health Organization has labeled "probably a carcinogen" --  and retiring the Monsanto name, shares of Bayer sit 48% lower than they were on that fateful day in 2016. After the company shed its stake in a former plastics unit and its animal health business over the past two years, trailing-12-month sales of 42 billion euros ($49.5 billion) sit 10% lower than where they ended 2016.

Bayer's sales are split between its pharmaceuticals and crop-science businesses, responsible for 58% and 41% of revenue, respectively. Both sides have contributed their share of legal losses and disappointments. In 2019, Bayer and Johnson & Johnson agreed to split a $775 million settlement regarding fatal bleeding episodes caused by the anti-clotting drug Xarelto. Xarelto was co-developed by the companies, but Johnson & Johnson unit Janssen sells the drug. On top of this, the agricultural unit took an $11 billion writedown earlier this month for the settlement of claims against Roundup.

In terms of disappointing sales, Bristol Myers Squibb's (BMY 0.61%) Eliquis has taken over the market that Xarelto previously led. To keep their split of the nearly $7 billion in annual Xarelto sales, Bayer and Johnson & Johnson will have to find new indications for the drug. Bayer also has exclusive marketing rights to Regeneron's eye drug Eylea outside the U.S., which netted Bayer about $2.5 billion in 2019.

Just last month, the company acquired AskBio, a gene therapy company, for $2 billion (another $2 billion could be earned with milestone achievements). This follows the 2019 purchase of BlueRock Therapeutics, another genetics company, for up to $1 billion.

It's hard to know whether Bayer's purchase of two gene therapy companies is an effort to buy its way into the cutting-edge areas of drug development or just testing the waters. The company returned to its healthcare roots in August with the purchase of KaNDy Therapeutics, a maker of drugs that address post-menopausal symptoms. 

If those deals don't produce new revenue streams soon, declining sales and one of the worst acquisitions in memory might leave shareholders looking for the ballot box. However, if investors want to cast a vote against Baumann, they may have to wait. The company recently extended his contract until April 2024.