The remuneration of the domes of the have been the star topic in the first season of post-pandemic meetings. Gone are those years when these issues tiptoed through the annual assemblies. Now, it is the issue that shareholders watch the most, and the one that generates the most controversy. And the data shows that every year the rejection received by the remuneration of the senior positions of the Spanish listed companies is greater.
In the 2022 meeting season, which ended this summer, average support for remuneration policies rose to 85.7%, according to data compiled by Georgeson for the Esade Center for Corporate Governance. It may seem like a high percentage, but the truth is that it has not stopped decreasing in the last five years (in 2018 it was 91%), according to the same source.
The other major remuneration issue that is voted on every year at these meetings is the Annual Report on Directors’ Remuneration, which in 2022 received an average vote in favor of 85.5% (in 2018, it was 88.5%).
A good handful of large listed companies received forceful “noes” in the remuneration field. The most impressive was taken by , with 43% of votes against his Annual Remuneration Report. The Spanish proxy advisor Corporance Asesores de Voto recommended this negative vote, due to “the high level of fixed remuneration, the high annual contributions to pension plans and the extraordinary bonus paid to executive directors during the year”.
Double-digit rejections at board
The Remuneration Report of , for its part, received an opposition of over 38%. The proxies agglutinated in the Proxinvest alliance lamented the existence of what is called the golden parachute, a shield clause that was activated with the departure of the former CEO, Jaime Guardiola, who received 23.9 million euros, 118% of his base salary. Another striking case is that of , which on June 17 garnered a historic rejection of 24.3% of its Annual Remuneration Report (in 2017, the opposition was 3.3%).
Although these votes are, in the vast majority of cases, consultative, the result they produce is usually taken into account by the companies. Juan Prieto, founder of Corporance, explains: “The law establishes that if the rejection exceeds 50%, the company must present a new plan,” he says, adding that “a rejection of 10% is already a warning; and from the 15th % and, above all, 20%, it is considered that the company must either present a new plan, or modify it”.
In this sense, from Georgeson they warn that investors are very attentive to whether or not the company takes into account their votes against. “Companies that obtained high dissidence in 2021 and have made an effort to respond to the market, executing coherent action plans, with tangible measures and making adequate disclosure, have obtained the support of investors in this 2022 meeting.” This is the case of : in the 2021 assembly, the remuneration of its directors received a “no” of more than 61%, and with a vote in favor of 91% after modifying its policies (it eliminated the right to use discretion in what regarding the remuneration of the board, that is, the power to freely decide on increases in remuneration).
Investors are very sensitive to the lack of alignment between the variables that the executive directors perceive and the behavior of the value
In 2022, the greatest scrutiny has focused on aspects that have been observed for years. Among these recurring issues are the penalties for a lack of alignment in the pay for performance (pay for performance, or for performance); the lack of clear disclosure of the metrics of the incentives, or payments for termination of contracts, considered, in many cases, excessive.
Investors are also very sensitive to the misalignment between the variables perceived by executive directors and the behavior of stock prices. This is because, on occasion, these bonuses are distributed precisely in periods in which the share price has plummeted, or in which the company has not been able to pay dividends.
Beyond these usual issues, according to Claudia Morante, head of Corporate Governance at Georgeson, in the 2022 season “newer issues” have also emerged. The first of them, “the lack of inclusion, or assigning a reasonable weight, to ESG metrics (environmental, social and good governance) in the annual and multi-annual incentives”, she explains.
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