Smith & Nephew boss quits after pay row

SMITH & Nephew’s chief executive has walked away from the business after his demand for a bigger pay package was refused.

namal nawana, who can earn more than £6m a year, will leave the medical equipment company after just 18 months in charge, it was announced.

the firm said he was quitting to ‘pursue other opportunities outside the UK’ and assured investors that roland Diggelmann, a non- executive director and industry veteran, had been lined up to succeed him. But the turmoil unnerved traders and sent S&n’s share price tumbling by 8.9pc, or 162p, to 1667.5p, wiping £1.4bn off the value of the business.

nawana’s exit follows controversy over his pay and reports that the company was considering a possible relocation to the US, partly because of the country’s more relaxed attitudes to the issue of executive pay.

the australian executive joined S&n in May 2018 and earned £2.2m for his first eight months, but is understood to have been dissatisfied with his package.

as pay policies were being drawn up this year, he is said to have argued his remuneration should have been in line with the lucrative packages handed to executives at rivals in the US.

For example, nawana ( pictured) previously earned as much as £8.6m in his old job running US diagnostics firm alere. But at S&n he could have earned a maximum of about £6.2m this year.

He had previously remarked on how he was paid ‘multiples more’ at alere than what he was earning at S&n.

‘all i can tell you is that the British system is the British system and i joined the company because i genuinely like this opportunity,’ he told the Financial times.

But yesterday a Smith & nephew spokesman said that in the past few weeks a ‘grown-up conversation’ with the board had led nawana to decide to quit. the spokesman added: ‘in the process of preparing our remuneration policy it became clear that we couldn’t meet namal’s expectations on pay and reward, relative to what US devices companies pay, within corporate boundaries.’

nawana arrived at S&n as it was facing demands from US hedge fund elliott that it sell parts of the company and increase returns to shareholders. He replaced Frenchman Olivier Bohuon, who left after criticisms of poor performance. Under nawana, S& n has undergone a reorganisation and this year posted rising profits and upgraded its full-year revenue predictions.

the company yesterday insisted Diggelmann, 52, was ‘the right person to build on the company’s success’. the former boss of roche Diagnostics will take over on november 1.

He will be able to earn a maximum of about £5.6m, a spokesman confirmed, including a salary of £1.1m.

When he takes over as chief executive, Diggelmann will continue to live in his native Switzerland, where Smith & nephew’s european headquarters is based. He will also be paid in Swiss francs.

S&n’s decision was cheered by campaign group the High Pay Centre, but director luke Hildyard said: ‘if a company is overly reliant on an individual executive, that reflects poorly on its long-term governance and management.’

He also added that Diggelmann’s package was still ‘way above the FTSE 100 average’.

‘With the right internal processes, Smith & nephew would be able to secure a chief executive for less than £5.5m,’ he said.

Russ Mould, investment director at AJ Bell, said: ‘nawana has only been in post for 18 months but has already helped revive the share price with a new strategy.

‘there appears to be a pretty simple reason he is leaving – pay.

‘the fear will be that this revamp of the business will be derailed by nawana’s departure, despite efforts to allay these concerns.’