'Excessive' | Internal battle in Smith & Nephew over executive pay raises wider questions

Internal battle in Smith & Nephew over executive pay raises wider questions

Shareholders of Smith & Nephew, a prominent FTSE 100 industrial group, are at odds over proposed executive pay rises, sparking a contentious internal battle within the company.

The proposed increase, particularly for the US-based CEO Deepak Nath, has drawn criticism from institutional shareholder services and ignited a broader debate about international competitiveness and corporate governance.

Under Smith & Nephew's proposals, Nath stands to receive a substantial pay rise of nearly 30%, with his maximum package potentially reaching $11.79 million next year.

This significant increase has raised eyebrows, especially in light of the company's recent history of leadership turnover, having gone through four CEOs in the past five years.

Institutional Shareholder Services (ISS), a leading proxy adviser, has voiced its opposition to the proposed pay rise, labeling it as "excessive."

ISS cited concerns about both the size of the increase and the structure of the new policy, which would grant US-based executives more shares regardless of performance.

The controversy extends beyond Nath's pay rise to the broader issue of international competitiveness and executive compensation.

Smith & Nephew's decision to increase pay for its US-based executives, while leaving its UK-based finance boss untouched, highlights the challenges of attracting and retaining top talent in an increasingly divisive global market.

The differing opinions among proxy advisers, with Glass Lewis backing the remuneration policy despite reservations, highlight the complexity of the issue.

While Glass Lewis acknowledges Smith & Nephew's rationale for paying more to its US-based leaders, ISS remains unconvinced about the necessity and fairness of the proposed increase.

Companies like Smith & Nephew, facing pressure to compete with US-based rivals, are grappling with how best to balance the interests of shareholders, employees, and the broader business community.

In response to the criticism, Smith & Nephew Chair Rupert Soames defended the company's proposal as a "sensible and pragmatic way" to address the challenges of recruiting talent from global markets.

However, the dissent among shareholders and proxy advisers suggests that the issue is far from settled.

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