Smith & Nephew (NYSE:SNN) shareholders yesterday shot down the company’s plan to award $3 million in bonuses to a group of 60 top executives.
The British healthcare giant’s remuneration committee approved the £2.1 million bonus award based on the 80% absolute return the company posted over the past 3 years, which beat the FTSE 100 index’s 20% return over that period.
But a Smith & Nephew’s pay policies tie the bonus to the median performance of a group of 18 of its peers, a mark that wasn’t met despite acquisitions for 3 of the companies on the list.
When the bonus was put to the test, 53% of shareholders’ votes were cast against it, Smith & Nephew said yesterday.
“The board notes that shareholders concerns are focused mainly around the use of discretion exercised by the remuneration committee when determining the vesting of the proportion of the performance share awards subject to the total shareholder return measure,” the company said in a regulatory filing. “We recognize that the use of discretion is a matter where there is considerable divergence of opinion. In spite of the voting outcome, the remuneration committee and indeed the board unanimously believe that in these particular circumstances the remuneration committee made the right decision in aligning executive reward to the shareholder experience. It did not take the decision lightly and considered the position over a number of meetings, looking at multiple different scenarios.”
Smith & Nephew said it plans to submit a new bonus plan to shareholders in 2017 after a thorough review this year.
Among the 18 peers on its list during the 3-year evaluation period for the bonus, Danaher (NYSE:DHR) paid $2.14 billion (CHF 2 billion) for Nobel Biocare; Medtronic (NYSE:MDT) paid $50 billion for Covidien; and S&N itself closed the $1.7 billion buyout of ArthroCare.
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