PAY ON PERFORMANCE ? ANALYSIS OF 2012 REMUNERATION IN ITALIAN LISTED COMPANIES SERGIO CARBONARA Analysis of 2012 Remuneration in Italian Listed Companies Index Purpose and methodology..........................................................................................................4 1. The remuneration in Italian listed companies ......................................................................9 1.1. The overall compensation ........................................................................................................9 1.2. The CEO remuneration ...........................................................................................................12 1.3. CEO remuneration by market capitalization..........................................................................19 1.4. CEO remuneration by industry ...............................................................................................22 1.5. Total remuneration awarded .................................................................................................31 2. FTSE MIB: the overall compensations ................................................................................33 3. FTSE MIB CEOs’ remuneration...........................................................................................36 3.1. Overall compensation vested in 2012 ....................................................................................36 3.2. The fixed component ..............................................................................................................44 3.3. The annual bonus ...................................................................................................................49 3.4. The long-term incentives ........................................................................................................59 Long-term incentives versus Total Shareholder Return ...................................................................................60 Long-term incentives versus operating results.................................................................................................64 3.5. Total remuneration awarded in 2012 ....................................................................................67 3.6. Remuneration policies 2013...................................................................................................70 Type of incentives.............................................................................................................................................73 Quality of disclosure .........................................................................................................................................74 Remuneration structure ...................................................................................................................................77 Discretionary variable components..................................................................................................................80 Correction mechanisms ( malus or claw-back clauses) .....................................................................................81 4. FTSE MIB Chairpersons’ remuneration...............................................................................83 Executive Chairmen ..........................................................................................................................................84 Non-executive Chairmen ..................................................................................................................................88 5. FTSE MIB Board members’ remuneration ..........................................................................91 Executive Directors (not CEO)...........................................................................................................................91 Non-executive Board members........................................................................................................................95 2 Analysis of 2012 Remuneration in Italian Listed Companies 6. An European comparison ..................................................................................................99 6.1. European CEOs’ remuneration in 2012 ................................................................................100 6.2. Variable compensation by industry......................................................................................105 Aerospace & Defence .....................................................................................................................................106 Apparel & Textile Products .............................................................................................................................107 Asset Management.........................................................................................................................................108 Automotive .....................................................................................................................................................109 Banks...............................................................................................................................................................111 Construction Materials ...................................................................................................................................113 Engineering & Construction Services..............................................................................................................115 Financial Services............................................................................................................................................116 Food & Beverage.............................................................................................................................................117 Healthcare.......................................................................................................................................................119 Industrial Goods & Services............................................................................................................................120 Insurance ........................................................................................................................................................122 Media..............................................................................................................................................................124 Oil & Gas .........................................................................................................................................................125 Retail...............................................................................................................................................................127 Telecom...........................................................................................................................................................129 Travel, Lodging & Dining.................................................................................................................................130 Utilities............................................................................................................................................................132 6.3. European Chairpersons’ remuneration in 2012 ...................................................................134 Executive Chairpersons...................................................................................................................................135 Non-executive Chairpersons...........................................................................................................................137 6.4. Non-executive Board members’ remuneration in 2012 .......................................................140 Conclusions ............................................................................................................................ 144 3 Analysis of 2012 Remuneration in Italian Listed Companies Purpose and methodology Over the last few years, also due to the global financial crisis, executive officers’ remuneration has been contested with increasing intensity by shareholders, that perceived an unacceptable disparity between the value created by the managers and their actual compensation. The high level of dissent urged market regulators to give shareholders the right to discuss remuneration policies at General Meetings (even through a non-binding vote in the majority of cases), in order to enhance the transparency and to foster the alignment between executives’ compensation and shareholders’ interests. The vote on remuneration reports immediately showed all its strength, so that many defined the proxy season 2012 as “the shareholder spring”, analogizing the level of complaints to real revolts. Since 2012, also Italian companies have to submit their Remuneration Report to the approval of their shareholders, through the so-called “say-on-pay”. Actually, the correct definition should be “say-on-policy”, as the vote officially refers on remuneration policies to be adopted the following year, not on the actual compensation paid. The debate whether it would be more appropriate a real “say-on-pay” is still alive, but the vote on policy has the great advantage to push on higher transparency on the objectives that each company wants to reach, especially through incentive plans. Anyway, it is not possible to evaluate any policy without taking into