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Smith & Nephew shareholders have been urged to vote against an “excessive” pay rise of almost 30 per cent for the head of the US-based FTSE 100 industrials group, the latest salvo in the battle by the London-listed global companies to increase executive pay. .
Under Smith & Nephew's proposals, Texas-based CEO Deepak Nath would receive up to $11.79 million next year if all targets are met, a 28.9 percent increase from the current maximum of $9.15 million. The increase is part of a new executive pay policy, which the company, which has had four CEOs in five years, has asked investors to support in a bid to reduce capital turnover at its top positions.
Institutional Shareholder Services, a proxy adviser, recommended shareholders reject the plan at next month's annual meeting, calling it “excessive.”
In an unusual move, Smith & Nephew is seeking to increase pay for Nath, but not its chief financial officer, who works from the UK, mirroring the higher pay packages on offer from US rivals. The company employs 18,000 people in about 100 countries.
ISS said it had “substantial concerns” about the size of the raise and the structure of the new policy, which would give US-based executives more shares in the company, regardless of their performance. “The case for some adjustments to US-based executives has been made strongly by the company and is understandable, and some changes can be justified,” ISS added.
Meanwhile, Glass Lewis, another senior adviser to the agency, supported the pay policy despite “reservations.” Glass-Lewis said Smith & Nephew provided a “compelling reason” to pay more to its US-based leaders.
The divide in approach between agents highlights different views in the UK market on the need for international companies to pay more to their top executives to compete with US rivals.
Companies, including London Stock Exchange Group and AstraZeneca, are proposing pay rises for their bosses on the back of concerns about the UK's international competitiveness. Several companies with large operations in North America, including betting group Flutter and building materials group CRH, have decided to withdraw from the FTSE 100 index for initial US listing.
The London Stock Exchange is preparing for a showdown with shareholders at its annual meeting later this month over the pay package for its CEO David Schwimmer, which is benchmarked against big US data groups such as Standard & Poor's Global, rather than British companies.
The group is seeking shareholder approval to raise its remuneration to approximately
£11 million from £6.25 million, an increase of 76 per cent. This is also where the advice of ISS and Glass Lewis differs.
ISS recommends investors vote in favor of the LSEG policy. But Glass Lewis believes “the increase is excessive.” It said that while it recognized LSEG's “global footprint and associated wage concerns,” the company did not “adequately justify a non-incremental increase of this size.”
In its annual report, Smith & Nephew said it had engaged on its executive remuneration proposals with 52 shareholders representing two-thirds of its share capital, and had received “support and positive feedback from the majority”.
The company declined to comment on ISS's advice.
“The current situation in the UK on wages is actually not sustainable,” Smith & Nephew boss Robert Soames told the Financial Times last month.
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Soames, who is also head of CBI's business, said the company's proposal “is a sensible and practical way to deal with an issue where London-listed companies need to be able to recruit talent from markets around the world, and these markets have different practices.” UK lobby group.
Former CEO Namal Nwana resigned in 2019 after 18 months in the job because the company did not meet his salary demands.
Nath received $4.7 million in the last fiscal year, well below the maximum allotment. The proposed package includes a new restricted stock plan worth 125% of salary, over three years. His maximum bonus under the company's long-term incentive plan, which is tied to performance, will rise from 275 percent to 300 percent of base salary.
