Elan has said that its chief executive Kelly Martin has agreed to change his current open-ended employment contract to a fixed term contract.
He will remain in his current role as CEO until May 2012. He will then serve on the board as executive adviser until January 2013.
The pharmaceutical company said the change is part of its commitment to excellence in corporate governance and 'prudent executive succession management'.
By 2013, Mr Martin will have spent 10 years at Elan and will have completed his commitment to the company, a statement said.
It added that today's announcement is intended to provide employees, patients, business collaborators and investors with clarity and continuity on the leadership of the company.
Kelly Martin, a former executive at Merrill Lynch with little prior experience in the pharmaceutical industry, was hired by Elan in 2003 to turn it around after an accounting scandal.
He came under fire for high spending and his handling of the development of Elan's bapineuzumab drug for Alzheimer's and Tysabri, a major treatment for multiple sclerosis, which was linked to a deadly brain infection in some patients.
Analysts said the two-year notice period showed tensions had already eased substantially within the boardroom but the prospect of Martin's eventual exit would help appease investors further.
Elan also announced in April that Kyran McLaughlin would retire as chairman with a replacement to be chosen by September or October.
Mr McLaughlin had to put himself forward for re-election at a shareholder meeting last month and - along with another director - was opposed by an unusually large 28% of shareholders.
