Big pay rise for Smith & Nephew chief shows US-style packages have arrived in Europe

You might think plummeting performance calls for a different approach at the top. Think again – a hefty CEO pay rise may be the answer.

So says FTSE 100 medical devices group Smith & Nephew, where shares have lost a quarter of their value over the past year and have halved in price since 2019.

Unsurprisingly, many were miffed when it proposed CEO Deepak Nath receive a 29 per cent increase in his maximum pay package, up to $11.8 million. A large shareholder rebellion ensued, with 43 per cent voting against the deal, but ultimately the pay proposal was passed.

The company says corporate talent is increasingly mobile in a globalised world and investors must pay up to retain top executives. It’s a familiar and arguably convenient argument, but Smith & Nephew can point out Nath is its fourth boss in the past five years and former CEO Namal Nawana left in 2019 as his salary expectations weren’t met.

Nath is based in the US, where corporate pay expectations are very different from the UK’s. This pay differential is reflected in Smith & Nephew not raising the pay of its UK-based chief financial officer. In other words, its argument regarding international realities around CEO pay appears sincere.

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Certainly, UK investors are increasingly accepting this narrative. In April, 89 per cent backed plans to more than double the maximum pay of London Stock Exchange group CEO David Schwimmer, to more than £13 million. At AstraZeneca, 64 per cent voted in favour of upping CEO Pascal Soriot’s compensation to £18.7 million. Some may feel sore at such pay deals, but US compensation packages are clearly influencing executive pay debates in the UK and Europe.