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Unicredit, here’s who approves and who criticizes Orcel’s big salary

Unicredit, here's who approves and who criticizes Orcel's big salary

What happens in Unicredit in view of the meeting of 31 March. The various positions on Orcel's salary and the overall remuneration policy in the banking group. Facts, numbers, controversies and insights

Not only the 2022 budget: the Unicredit shareholders who will meet in the meeting on March 31 will also have the task of voting on the remuneration policy, in which the increase in the remuneration of the managing director, Andrea Orcel, stands out. For the Roman banker, therefore, the possibility of increasing both the fixed remuneration and the variable part, paid in shares, but only if he manages to exceed very stringent targets. For a total that could reach 9.75 million a year.

On the proxy advisor front, ISS and Glass Lewis have urged shareholders to vote against the proposal because it would lead to an excessive increase in the CEO's total compensation. The shareholder Parvus Asset Management (just over 5%) is in favor of the new remuneration package and indeed in an interview with Bloomberg Edoardo Mercadante, who leads the fund, declared that it is a "fair" proposal and that "in changing culture and operational execution, the board is truly one of the best.”

The Cariverona Foundation also agrees, which holds around 1.72% of the banking group in its pocket – “Dr. standards currently adopted by comparable groups in Europe and the United States”, said the chairman Alessandro Mazzucco – as well as another historic shareholder, Allianz (3.34%), and perhaps also the Del Vecchio family (1.9%), according to rumors reported by Milano Finanza . And it is today's news that the Norwegian sovereign wealth fund will also vote in favor of the new remuneration package for the group's managers.

Last but not least , the blessing came from the president of the group, Pier Carlo Padoan, who on 17 March took pen and paper and wrote to the Financial Times to defend the board's choices and clarified that the statement according to which "Orcel's salary has been increased is questionable" since the pay in case of "simple achievement of the objectives remains unchanged despite more demanding targets". Therefore "the proposed package rebalances the relationship between fixed and variable pay to reward results that exceed ambitious goals".

However, not only Orcel but also more than 900 managers of the credit institution will obtain an important salary adjustment.


The following will benefit from the 2022 Group Incentive System, according to the documents prepared for the meeting: the Chief Executive Officer (CEO), the members of the Group Executive Committee (GEC) and the Group Chief Audit Executive (CAE); managers who report directly to members of the GEC (GEC-1), to the Group EWC and other Senior Management positions, for example the members of the Management Bodies of the identified Group Legal Entities; other selected Group roles that have a material impact on the Group's risk profile.

In particular, 13 UniCredit executives are listed who "are among the individuals who have regular access to privileged information and hold the power to adopt management decisions that may affect the evolution and future prospects" of the group or Orcel, the head of Germany, Marion Hoellinger; the head of Central Europe, Gianfranco Bisagni; the head of Eastern Europe, Teodora Petkova; Client Solutions Manager, Richard Burton; the Chief Financial Officer, Stefano Porro; the Group Digital & Information Officer, Jingle Pang; Group Operating Officer, Bart Schlatmann; the Group Risk Officer, Tj Lim; the Group Compliance Officer, Serenella De Candia; the Group Legal Officer, Gianpaolo Alessandro; the Chief Audit Executive, Guglielmo Zadra; the head of Group People & Culture, Siobhan Mc Donagh.


If the shareholders' meeting gives the green light to the group's new remuneration policy, therefore, Orcel will be entitled to a fixed remuneration of 3.25 million from 2.5 million in 2022 (on this the board of Unicredit and the decision is not subject to the vote of the Assembly). On the other hand, the shareholders will pronounce on the variable part: the variable compensation could reach up to 6.5 million (in shares only) if the 2023 objectives are exceeded, a figure that will drop to 4.25 million if the objectives are achieved (in this In the latter case, the total remuneration, fixed plus variable, will be the same as last year: i.e. 7.5 million). It must be said that last year Unicredit gave its CEO – in addition to the fixed remuneration of 2.5 million – also a bonus of 5 million, again in shares.


And if, as Ansa points out, in 2022 dividends for shareholders grew by 40% and the stock on the Stock Exchange by more than 78%, the extra performance financial objectives envisage revenues of over 19.9 billion and profits of over 5 .5 billion, cost income below 45.9% and +180 basis points of organic capital generation.


The new chairman of the Remuneration Committee, Jeffrey Hedberg, also spoke on the issue, wanting to explain the "philosophy" of the move. "We have therefore proposed to the board of directors a new model that provides greater incentives for outperformance for the chief executive officer, ensuring fair remuneration that is an expression of actual, current and future performance" he said, underlining that "in the last two years, consistent performance drove the holistic transformation we see today. The goals we are talking about have been deliberately ambitious, encouraging the company to strive to go beyond expectations and the results have created a bank that is industrially and culturally diverse”. And now it is necessary to "incentivise this type of performance on an annual basis" through a new "remuneration package" because the current one does not allow it as "it was designed to encourage the achievement of results rather than their overcoming".


In addition to the increase from 5 to 6.5 million in the variable portion, the remuneration for Orcel also increased which, as can be read in the tables attached to the shareholders' meeting documentation, went from 2.5 million to 3,541,046. The second highest salary goes to the president Pier Carlo Padoan with 921,508 euros. For the other members of the board of directors, the fees vary from 332,200 euros for Elena Carletti to 151,000 for Renate Wagner, passing through 234,800 for Maria Perdicchi, 231,073 for Alexander Wolfgring, 208,400 for Jayne-Anne Gadhia and 168,073 for Vincenzo Cariello.

In total, over 6.6 million are spent on the board in Piazza Gae Aulenti, of which over 5.5 million in fixed fees.


In reality, there has also been talk of the salary changes in Piazza Gae Aulenti for other reasons, namely the resignation of Jayne-Anne Gadhia . According to what was revealed by the Financial Times , the British manager would have decided to leave the board of Unicredit after being accused of revealing confidential information to the press. An internal audit would have followed, to identify the source of some news that appeared in the newspapers, and Gadhia would have been heard by the president Padoan and by the chief lawyer, Alessandro. The charges would later be dropped but for the councilor it would have been "unsustainable" to remain on the bank's board of directors. Therefore, he would have opted for his resignation while maintaining the position of senior advisor.

But what does his farewell from Unicredit have to do with Orcel's salary? Simple: as chairman of the nomination committee, among Gadhia's duties there was also that of supervising the remuneration of top management and seeking the support of investors.

However, the Chairman of Unicredit, Padoan, in a letter to the FT , explained that "the suggestion that the former chairman of UniCredit's remuneration committee, Jayne-Anne Gadhia," left the bank following "salary skirmishes CEO "is false". Unicredit had in fact already explained that "the reasons" for Gadhia's resignation were "clearly set out" in the note released in conjunction with the release, on February 10, and are "consistent with his letter of resignation to the bank". The press release highlighted that the reasons were "linked to the assumption of a new position (the presidency of Moneyfarm, ed .) and the consequent greater commitment" that would have been required of her.


Looking across the border, there are also other number one banks that earn much more than significant figures. For example, there is Ralph Hamers, CEO of the Swiss Ubs, who takes home up to a maximum of 17.5 million. Then there are Ana Botin, from Santander – with whom Orcel is in a legal dispute -, who instead has to settle for 12.9 million, and Coimbatore Sundararajan Venkatakrishnan, an American born in India, CEO of Barclays, with 11 million. More or less at the same level as the CEO of Unicredit is Christian Sewing of Deutsche Bank with 9.9 million.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Mon, 27 Mar 2023 05:33:28 +0000.