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Smith & Nephew survived a major shareholder revolt over a $2.6mn potential pay rise for its chief executive, in the latest controversy on executive remuneration by UK-listed companies competing with high-paying international rivals for talent.
The company’s general meeting saw 43 per cent of shareholders vote against the medical devices company’s proposals, which will see Texas-based Deepak Nath receive up to $11.8mn next year if all targets are met, a 28.9 per cent increase on his current maximum package of $9.2mn.
The result is the closest of a series of votes over chief executive remuneration in recent weeks at FTSE groups. The company said it “will continue to engage with shareholders and proxy advisers” over the plans and update on future consultations in six months.
The maker of joint implants and surgical devices had justified the pay rise by saying that low pay had contributed to the high turnover of chief executives. The company has seen four bosses in the space of five years.
But Institutional Shareholder Services, a proxy adviser to investors, recommended last month that shareholders vote down the plan, which it called “excessive”. Another proxy adviser, Glass Lewis, had supported the plan despite “reservations”.
The medical devices company is the latest FTSE company to withstand a shareholder revolt on large hikes to chief executive pay, after AstraZeneca, the London Stock Exchange Group and Ocado all faced down dissenting voices to their plans to hand executives lucrative packages.
The companies have said that investors need to increase pay levels to hire and retain executives, as they compete in a global market for talent.
Unusually, Smith & Nephew will not raise the pay of its UK-based chief financial officer, underlining differing pay packages between the US and UK.
Speaking ahead of the vote, Nath told the Financial Times that the pay package was in the “long-term interests of the company” but said he would “absolutely” remain with the company regardless of the outcome of the decision.
He added that he appreciated “differences in society and in norms on both sides of the pond”, in reference to varying levels of pay between the US and UK.
Prior to the vote, the company’s chair Rupert Soames told the FT that the payment changes accounted for the company’s US focus and were a “sensible and pragmatic way of handling an issue where companies listed in London need to be able to recruit talent from markets around the world and those markets have different practices”.
Namal Nawana, a previous chief executive, quit the company in 2019 after 18 months in the job because it did not meet his pay demands.
Wednesday’s vote coincided with Smith & Nephew’s results for the first quarter of 2024. Sales at the company grew by 2.2 per cent to $1.4bn dollars, below analysts’ estimates, with the US accounting for almost half of total revenue. Shares closed broadly flat on Wednesday, trading at 980.8p.
