Last checked at 14 Apr 2016 17:14
14 April 2016
Smith & Nephew plc
Smith & Nephew announces the results of the voting by poll on the resolutions put to its Annual General Meeting held at 2pm on 14 April 2016.
Resolution | For/Discretion (Number of votes) |
Percentage For/Discretion (%) | Against (Number of votes) | Total votes validly cast | Percentage of relevant shares in issue (%) | Withheld (Number of votes) |
Ordinary resolutions | ||||||
1. To receive and adopt the audited accounts | 631,479,299 | 99.99 | 70,136 | 631,549,435 | 70.51% | 1,712,958 |
2. To approve the Directors' Remuneration Report (excluding Policy) | 272,923,229 | 46.99 | 307,890,596 | 580,813,825 | 64.85% | 52,448,566 |
3. To declare a final dividend | 633,044,503 | 99.99 | 47,587 | 633,092,090 | 70.68% | 170,303 |
4. To re-elect Vinita Bali | 626,444,216 | 98.97 | 6,508,156 | 632,952,372 | 70.67% | 309,145 |
5. To re-elect Ian Barlow | 631,099,788 | 99.71 | 1,855,177 | 632,954,965 | 70.67% | 307,427 |
6. To re-elect Olivier Bohuon | 627,715,177 | 99.17 | 5,237,404 | 632,952,581 | 70.67% | 309,811 |
7. To re-elect The Rt. Hon Baroness Virginia Bottomley of Nettlestone DL | 628,118,295 | 99.23 | 4,848,061 | 632,966,356 | 70.67% | 296,037 |
8. To re-elect Julie Brown | 626,917,710 | 99.05 | 6,022,024 | 632,939,734 | 70.67% | 322,658 |
9. To re-elect Erik Engstrom | 631,471,358 | 99.77 | 1,434,338 | 632,905,696 | 70.66% | 356,697 |
10.To elect Robin Freestone | 630,631,405 | 99.64 | 2,282,040 | 632,913,445 | 70.66% | 348,948 |
11. To re-elect Michael Friedman | 629,102,601 | 99.40 | 3,827,947 | 632,930,548 | 70.66% | 331,843 |
12. To re-elect Brian Larcombe | 611,956,966 | 96.81 | 20,153,487 | 632,110,453 | 70.57% | 1,151,939 |
13. To re-elect Joseph Papa | 613,133,671 | 97.54 | 15,450,120 | 628,583,791 | 70.18% | 4,678,600 |
14. To re-elect Roberto Quarta | 623,320,236 | 98.55 | 9,174,439 | 632,494,675 | 70.62% | 767,718 |
15. To re-appoint KPMG LLP as the Auditor | 627,578,788 | 99.84 | 981,253 | 628,560,041 | 70.18% | 4,702,351 |
16. To authorise the Directors to determine the remuneration of the Auditor | 632,491,553 | 99.94 | 378,237 | 632,869,790 | 70.66% | 392,603 |
17. To renew the Directors' authority to allot shares | 622,400,709 | 98.34 | 10,534,835 | 632,935,544 | 70.67% | 326,849 |
Special resolutions | ||||||
18. To renew the Directors' authority for the disapplication of the pre-emption rights | 573,758,792 | 93.69 | 38,660,179 | 612,418,971 | 68.37% | 20,843,420 |
19. To renew the Directors' limited authority to make market purchases of the Company's own shares | 628,940,015 | 99.39 | 3,851,185 | 632,791,200 | 70.65% | 471,192 |
20. To authorise general meetings to be held on 14 clear days' notice | 535,087,474 | 84.55 | 97,787,969 | 632,875,443 | 70.66% | 386,949 |
The number of Ordinary Shares in issue on 12 April 2016 at 6pm (excluding shares held in Treasury) was 895,684,064. Shareholders are entitled to one vote per share. A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes validly cast.
A copy of the Resolutions passed as Special Business at the Annual General Meeting is being submitted to the UK Listing Authority and will shortly be available for inspection at the National Storage Mechanism document viewing facility at: http://www.morningstar.co.uk/uk/nsm
The Board notes that Resolution 2 to approve the remuneration report has received a significant number of votes cast against it (307,890,596 votes, 53.01% of votes validly cast). In addition, the holders of 52,448,566 shares withheld their votes.
Joseph Papa, the Chairman of the Remuneration Committee undertook an extensive engagement programme with shareholders ahead of the Annual General Meeting and has discussed this outcome and shareholder views with the Remuneration Committee and the Board over the past few days. 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 (TSR) measure. We contacted the holders of around half our shares when we posted the Annual Report. Since then, around a quarter of our shareholders have contacted us to let us know their voting intentions and Mr Papa has discussed the process the Remuneration Committee went through in reaching its decision with most of these investors. Mr Papa also spoke to the Investment Association and Institutional Shareholder Services, organisations which analyse Company annual reports and make voting recommendations and seek views from their members.
A significant number of shareholders were supportive of the Remuneration Committee's use of discretion, recognising that during the three year performance period, shareholders had enjoyed an excellent 80% absolute return, well ahead of the FTSE 100 at 20%, whilst the executives who had created that success would have received no reward in respect of TSR had the Remuneration Committee not exercised its discretion. This exercise of discretion resulted in a total payout of £2.1 million shared between around 60 senior executives. Nevertheless, a significant number of shareholders were opposed to the use of upwards discretion on principle, independent of their views of the performance of the Company.
We recognise 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. The use of discretion in 2016 is not intended to create a precedent for future years, but was used to address a particular anomaly arising as a result of losing three companies from the TSR peer group due to market consolidation during the performance period. Mr Papa had met with a number of major shareholders at the end of 2015 to discuss how this matter should be addressed. The overwhelming response from the shareholders he met was that substituting new companies for the companies which had fallen out of the peer group, in accordance with the Plan Rules which had been drafted to accommodate potential industry consolidation, would not be appropriate. Instead the feedback from some of these shareholders was that it would be better for the Remuneration Committee to exercise their discretion, which was exactly what they did.
Looking ahead, as mentioned in our 2015 Annual Report, the Remuneration Committee is undertaking a thorough review of remuneration arrangements during 2016, ahead of putting a revised Remuneration Policy to shareholder vote in 2017. Over the summer, they will consult with a broad range of shareholders to solicit their views on how best to align executive reward with shareholder interests.
We thank the shareholders, the Investment Association and Institutional Shareholder Services who have engaged with us to debate the issues which the Remuneration Committee has faced.
Susan Swabey
Company Secretary
Smith & Nephew plc
Tel: +44 (0)20 7401 7646