Your vote counts: Smith & Nephew’s new million-pound CEO put to vote

Our city expert assesses key considerations for shareholders in two upcoming AGMs, including the £11 billion FTSE 100 company.

Caption: Deepak Nath, the new CEO of Smith & Nephew. Credit: Margaret Fox.

A ‘golden hello’ payment of £6.4 million for the new boss of Smith & Nephew (LSE:SN.) will be among areas of focus for shareholders at this month’s AGM of the medical devices business. 

Deepak Nath is due to get the award to compensate for outstanding incentives that he will forfeit on leaving his former employers at Siemens Healthineers.

Nath has replaced Roland Diggelmann, whose departure after two years in the role was by mutual agreement and came after a year in which shares fell by 14%. Corporate adviser Glass Lewis has recommended shareholders support the FTSE 100 company’s remuneration report.

• Your AGM guide: what you can do and how to do it
• Shareholder voting & information. Have your say on the companies you invest in

Smith & Nephew

When: 2pm, Wednesday 13 April.

Where: Smith & Nephew’s Expert Connect Centre, Building 5, Croxley Park, Hatters Lane, Watford, WD18 8YE.

How to participate: the AGM will be held as a hybrid meeting, enabling shareholders to attend, vote and raise questions by electronic means or in person. More details on how to join the meeting online can be found here.

Who’s in the chair? Roberto Quarta, the former chief executive of BBA Aviation, has been chairman since the 2014 AGM. He is due to stand down towards the end of 2022.

How did the company do in the year to 31 December? The orthopaedics, sports medicine and advanced wound management business reported revenues of $5.2 billion (£3.9 billion), up 14% on a reported basis. Compared to 2019, revenues in the fourth quarter were down 6.7% on an underlying basis. The group’s full-year operating profits doubled to $593 million (£449 million) and earnings per share lifted 17% to 59.8 cents (45.3p). The total dividend of 37.5 cents (28.4p) a share is in line with 2020 and 2019 and includes 23.1 cents (17.5p) for payment on 11 May.

How did shares perform over the year? Down 14% to 1,293.5p.

What was the chief executive paid? Roland Diggelmann left this week (31 March) after just two years in the role. His total pay package came to $3.1 million (£2.35 million) for the last year. As well as his basic salary of $1.5 million (£1.1 million), he got $1.3 million (£1 million) in cash and shares based on 83% of his bonus target. The remuneration committee considered whether to apply discretion in light of the share price performance, but decided the company had delivered close to its financial targets and experienced no reputational risk issues.

What are his leaving arrangements? Diggelmann will continue to receive his base salary, plus pension payments and benefits up to 28 February 2023. He is also entitled to the bonus awards from last year and any relating to his employment so far in 2022.

Who is the new boss? Deepak Nath took over as chief executive today (1 April). He was previously at Siemens Healthineers, where he was president of the diagnostics business, and before that in leadership roles at Abbott Laboratories and Amgen. He will be based in the United States.

How much will he get? His basic salary has been set at $1.47 million (£1.1 million), in line with Diggelmann’s pay. However, he is getting buyout awards to the value of $8.5 million (£6.4 million) in respect of outstanding incentives that he has forfeited on leaving his former company. An amount of up to $800,000 (£606,000) will also be paid in cash in November to cover his forfeited 2022 cash bonus.

Any other pay changes? Finance director Anne-Françoise Nesmes is getting a 6.2% pay rise, 4% of which is to recognise her expanded role. The rest is made up of a 2.2% annual pay increase, which is below the 2.9% applied to the wider workforce.

What’s the view of voting agencies? Glass Lewis is “somewhat concerned” by the value of the recruitment awards for Nath. However, it notes they are on a like-for-like basis and will be subject to the original performance and vesting periods. The agency has recommended shareholders support the annual remuneration report.

What happened at last year’s AGM? The annual remuneration report got 99.5% of votes in favour. The re-election of chairman Quarta was opposed by 8.25% of votes.

How is the company doing on diversity? The company meets the recommendations of the Hampton-Alexander and Parker reviews on gender and ethnic diversity in the boardroom.

Why is there a resolution on the ShareSave plan? The current UK scheme has reached the end of its 10-year life and the company needs to adopt a replacement to enable it to continue to offer this benefit to employees. It is the same as the previous scheme.

RM Group 

When: 11.30am, Thursday 7 April.

Where: 142B Park Drive, Milton Park, Abingdon, Oxfordshire, OX14 4SE.

How to participate: requests to join the RM (LSE:RM.) event remotely should be sent to agm2022@rm.com and questions for the AGM submitted to the same address no later than 10am on Tuesday 5 April. More details on the AGM can be found here.

Who’s in the chair? Helen Stevenson is hosting her first RM AGM, having been appointed in February. The former Yell chief marketing officer is also senior independent director at Reach.

How did the company do in the year to 30 November? The supplier of technology and resources to the education sector grew revenues by 12% to £210.9 million and adjusted profits by 22% to £17.1 million. In light of a good cash performance and generally positive market trends, the company increased its total dividend to 4.7p. This includes an unchanged final dividend of 3p a share for payment on 29 April.

How did the shares perform in the year? Down 2% at 202p.

How much is the boss paid? Neil Martin, who has been chief executive since last March, received a total remuneration package for the year worth £628,000, including a bonus of £125,000 as 35.8% of the maximum opportunity. Long-term incentives granted in 2018 vested at 38.5% of their total and were worth £116,000. His base salary of £365,000 has not been changed for the current year, compared with the average workforce pay rise of 2.5%.

What’s the view of voting agencies? Glass Lewis voiced concern at the use of single performance metrics for the bonus and long-term incentive plan, as these may result in payouts that do not reflect broader company performance. However, it accepts the difficulty of target-setting caused by the Covid-19 pandemic and said the matter does not warrant shareholder action. It recommends support for the annual remuneration report.

How did last year’s AGM go? The new three-year remuneration policy was backed with 87.23% of votes in favour, while the annual remuneration report received 99.6% support.