Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The former chief executive of Smiths Group, who quit the FTSE 100 industrial conglomerate last month, is in line for a multimillion-dollar pay rise after moving to a US company half the size, highlighting the gulf in executive pay between the UK and America.
Smiths announced in late March that Paul Keel, an American, would leave the company immediately after less than three years in charge.
He was unveiled last week as the next boss of Envista, a New York-listed dental products manufacturer, with a market capitalisation of $3.4bn — about half of Smiths’ valuation.
As boss of Smiths, which makes airport scanners and employs 15,000 people in more than 50 countries, Keel was paid £4.3mn ($5.3mn), including bonus, pension and share awards, in the 12 months to July 2023, up from £2mn a year earlier.
If he hits performance targets at Envista, Keel stands to be paid $9.25mn in cash, shares and options for his first year. The shares and options would vest over three years and Keel would also receive pension and other benefits. His payout could be substantially higher if he exceeds his targets and the share price rises.
The move will add fuel to a debate raging in the City of London about whether investors’ opposition to larger, American-style executive pay deals at UK-listed companies is hurting their attempts to compete with US groups to attract and retain talent.
London Stock Exchange Group and Smith & Nephew are among the FTSE 100 companies hoping to follow AstraZeneca by pushing through pay increases for their executives at upcoming annual meetings.
Keel, a former 3M and GE executive, joined London-headquartered Smiths in May 2021. However, his exit was seen as inevitable from early in his tenure when shareholders privately rebuffed a plan to offer him a $10mn bonus, according to people with knowledge of the plan.
The planned retention package was linked to a target of doubling the company’s share price over a number of years, the people said.
Not all investors were opposed to the proposal but it was dropped over concerns it would not pass a shareholder vote, they added. A failed vote would likely have created pressure for the chair of Smiths’ remuneration committee to step down.
The failure to put the pay deal in place and the fact that Keel’s wife had remained in the US rather than moving to the UK as planned meant “the writing was on the wall” for him staying at Smiths for the long term, one of the people familiar with investors’ response to the conglomerate’s proposal said.
The process to appoint a chief executive in 2021, which led to Keel’s arrival, had been fraught with difficulty because of Smiths’ inability under UK governance norms to offer a pay deal large enough to attract most US-based candidates, the people said.
Hiring Keel was made easier because Smiths did not have to buy him out of unvested share awards from his previous role at stationery giant 3M, they added.
British executive Roland Carter, a three-decade Smiths veteran, replaced Keel with immediate effect last month. The company said at the time that Carter’s appointment demonstrated “robust succession planning”.
Smiths declined to comment. Keel and Envista did not respond to requests for comment.
Read the full article here