Wed. May 18th, 2022

Influential proxy adviser Glass Lewis has recommended investors reject UniCredit’s remuneration policy next week, as chief executive Andrea Orcel’s pay is set to be a divisive issue at the Italian bank’s shareholder meeting for the second year running.

Orcel received € 6.7mn in pay last year, including a € 5mn sign-on bonus that was not tied to performance, making him one of the best-paid bank executives in Europe. His package this year includes a € 2.5mn salary, as well as a potential € 5mn short-term performance related bonus and longer-term incentives.

“Glass Lewis does not believe that the company’s remuneration strategy, as currently constituted, is sufficiently aligned with shareholders’ best interests,” the proxy adviser said in its report ahead of UniCredit’s AGM on April 8. As such, we do not believe that this proposal merits shareholder support. ”

The adviser added that its concerns were “magnified” by the more than doubling of Orcel’s potential severance entitlements, from € 7.2mn to € 15mn. “While we recognize that € 15mn is set as a cap on potential entitlements, we find this quantum to be excessive,” it noted.

Fellow proxy adviser ISS, which holds more sway over UniCredit shareholders, gave its qualified support to the company’s policy, though it added: “The problematic CEO pay package approved in 2021 provides for pay outcomes that might be concerning. . . The company has not sufficiently addressed the relatively high level of dissent on the severance proposal at the 2021 AGM. ”

Last year, UniCredit narrowly survived a shareholder rebellion after Glass Lewis and ISS both recommended investors reject the company’s pay policy. More than 40 per cent of shareholders did, with the company attracting support from 54 per cent.

Proxy advisers are influential among passive and large institutional investors, who typically follow their recommendations when voting.

Orcel joined UniCredit as chief executive last year, succeeding Frenchman Jean Pierre Mustier, who voluntarily reduced his salary by a quarter in his final year in response to the pandemic and gave up € 2.4mn in bonuses.

When Orcel joined he was in the middle of a long-running legal battle with Santander over the Spanish lender’s abortive attempt to hire him as chief executive in 2018.

Orcel won the case in December and was awarded € 68mn in compensation, which was reduced by a Madrid judge to € 51.4mn in January. Santander is contesting the judgment.

The Italian bank sets its remuneration policy after consulting investors who own more than half its shares, according to a person familiar with the matter. This year it made Orcel’s bonus solely tied to performance and added clawback provisions. UniCredit declined to comment.

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