CBI chief Rupert Soames is pushing for US-style pay packages after sounding out investors about an executive pay shake-up at the FTSE 100 company he chairs.
The City grandee has been leading efforts to win shareholder support for a new pay deal at medical devices maker Smith & Nephew in recent weeks.
Mr Soames, the grandson of Sir Winston Churchill, wants to amend the company’s pay policy to reflect higher salaries for executives in the US, where chief executive Deepak Nath and its top leadership are based.
The 64-year old, who took over as Smith & Nephew chair four months ago, has pitched a “hybrid” US-UK pay scheme for Nath and his team to reflect Wall Street pay practices, City sources said.
US companies often used time-restricted stock as a form of payments but they have been controversial in the UK due to having no performance conditions attached.
Smith & Nephew makes the bulk of its sales in the US, with $2.7bn (£2.1bn) of revenues versus just $186m from the UK.
The company, founded in Hull in 1856, has faced executive pay issues in recent years after losing former chief executive Namal Nawana over its low payouts.
He quit after 18 months because his pay deal did not match what he earned in the US.
The company has had four chief executives in five years, although only Nawana resigned over pay matters. This has added pressure to make sure the company’s pay practices reflect high salaries on offer from US peers.
US rival Stryker, which competes fiercely with Smith & Nephew, paid its chief executive Kevin Lobo $18.5m last year, for example, compared to Nath’s $5.9m package.
The proposed hybrid pay scheme is likely to be included in Smith & Nephew’s next annual report and voted on at its spring annual meeting.
It is understood the idea has so far won broad support from shareholders, underlining the recognition that companies with a large US presence may have to pay US-style packages to compete overseas.
If approved by shareholders, the proposal could open the floodgates for more US-style pay packages for other UK listed firms.
British remuneration policies have seen a sea change in recent months as investors seek to help make London competitive amid a wave of companies relisting in New York.
The UK’s largest fund manager Legal & General signalled a change of approach with the publication of a new pay policy in December saying it would consider hybrid awards.
The Investment Association, which represents the UK’s £9 trillion fund management industry, has also been consulting members on overhauling its pay principles which could mean future backing for hybrid schemes.
Smith & Nephew is based in Watford but its top leadership is based in the US.
It employs about 18,000 people in 100 countries making joint replacements and wound treatments. The company will release its fourth quarter and full year 2023 results on February 27.
Smith & Nephew declined to comment.
