The chief executive of Smith & Nephew will step down after only 18 months in the job following a row over his pay.
He will be succeeded by Roland Diggelmann, a former Roche Diagnostics executive, who has been on the Smith & Nephew board as a non-executive director since March 2018.
Diggelmann will take the helm on 1 November; Nawana will stay with the company until the end of December to “provide advice and assistance”.
It is understood that Nawana, who is based in Andover in Massachusetts, is leaving because his requests for higher pay, in line with the packages awarded by US medical device-makers, could not be met under UK corporate governance standards. The board reportedly discussed relocating the company to the US over the summer.
Shares in the FTSE 100 firm – which began as a pharmacy in Hull more than 160 years ago – fell more than 8% to £16.81 at lunchtime on Monday, wiping more than £1bn off its market value.
Diggelmann ran Roche Diagnostics, a subsidiary of the Swiss healthcare firm Roche with an annual turnover of CHF11.5bn (£9bn), for six years until 2018 and previously worked at Sulzer Orthopedics and Zimmer.
Analysts at Berenberg noted that Diggelmann was considered for the CEO role in October 2017 but was unable to join then from Roche Diagnostics. They did not expect any change in strategy and believed many shareholders, in particular specialist healthcare investors, were “likely to look upon him favourably”. They added: “Many investors, particularly in the UK, will applaud the board’s decision to stand firm on executive pay.”
Diggelmann, a Swiss national, will be based at Smith & Nephew’s site in Baar, Switzerland, which will move to Zug next year. He will be paid an annual salary of £1.08m, as part of a pay package of up to £5.5m including bonuses, dependent on performance. This includes a pension contribution of 12% of salary.
His predecessor joined on a similar annual salary of £1.1m but has been receiving bigger pension contributions, of 21.5% of salary, as well as cash and share bonuses. He could receive a maximum package of just over £6m this year.
Nawana joined Smith & Nephew in May 2018 after turning around the US diagnostics firm Alere and overseeing its sale to Abbott for $5.3bn in 2017. He has resisted pressure from the British company’s activist investor Elliott Advisors to break itself up.
Roberto Quarta, Smith & Nephew’s chairman, said Nawana had “substantially transformed the business with a new strategy, purpose and culture, and renewed commitment to innovation, returning it to an improved growth trajectory”.
The company was founded in 1856 by Thomas James Smith, who was later joined by his nephew.