Frontis Governance published the 2013 study on remuneration in Italian listed companies: Pay on Performance?

Posted on September 24, 2013


During the last few years, also thanks to the financial crisis, the executives’ remuneration at listed companies has become a critical issue in the dialogue between issuers and shareholders, who often contested the gap between the top managers’ compensation and the value created. The Frontis Governance’s report analyses in deepest details all the remuneration components of the CEOs and the Board members of 98 Italian listed companies. The purpose of the study is not to define whether an overall compensation is too high, but, as the title states, to evaluate its actual alignment to the company’s goals: are remunerations effectively structured to pay the performance?

Since the first year of implementation, the shareholders’ vote on remuneration reports showed all its strength: in 2012 the level of dissent was so high to define that proxy season “the shareholders’ spring”. Nonetheless, one of the main and clearest effects of the introduction of the say-on-pay in Italy, is a higher transparency on executives’ remuneration structure. The analysis of 2012 remunerations is therefore highly relevant for at least two reasons: for the first time it is possible to observe the changes of each component over the time, also allowing a first evaluation of the closer dialogue between issuers and minority shareholders.

Methodology and contents

The Frontis Governance’s study, Pay on Performance? Analysis of 2012 Remuneration in Italian Listed Companies, scrutinizes the compensation structure of 98 largest Italian issuers. All remuneration components are analyzed by their nature (cash, shares or stock options) and relevant vesting period (base salary, annual bonus and long-term incentives), in order to compare each amount through appropriate parameters: company’s size, operating results and stock market performances, achieved the previous year and in the long term.

The second part of the study is focused on the remuneration vested in 38 FTSE MIB index components, enlarging the analysis to the entire Board of Directors: the CEOs, the Chairpersons and all other members, differentiating the executives from the non-executive ones.

Finally, thanks to the partnership with the international network of proxy advisors ECGS (“Expert Corporate Governance Service”), it has been possible to compare the remuneration structure at Italian large-caps with a sample of European peers, operating in the same industries represented in the FTSE MIB index.


Italian CEOs’ overall compensation increased by 27.5% in 2012 (+31.3% in 38 FTSE MIB companies), but the in-depth analysis led to much more articulated conclusions, that in some way answered the initial question:

  • The amount of base salaries seems to be completely independent of the company’s size, both in Italian companies and in comparison with their European peers: the average fixed component of Italian CEOs ranked second in Europe, despite the lower market capitalization.
  • Annual bonuses seem not to be correlated to any performance achieved in the short term, both in terms of operating criteria and total shareholders’ return.
  • The alignment between the long-term incentives and the value created is not clear, but it is possible to verify a higher correlation of vested incentives with operating performances (in terms of EBITDA, Tier 1 Ratio or Solvency Ratio, according to relevant industry).
  • The introduction of the say-on-pay already caused clear positive effects: the quality of disclosure improved with regards to long-term incentive plans (while annual bonuses still represent a critical issue) and several companies changed some remuneration clauses (better defining the severance provisions or eliminating discretionary variable components), often urged by shareholders.
  • Last proxy season’s results confirm the positive effects of the closer dialogue between companies and their financial stakeholders: dissent votes, coming from strictly independent shareholders, decreased by 17.3% in 2013, to 30.2% from 36.5% in 2012.

Download here the full report: Analysis of 2012 Remuneration in Italian Listed Companies

Download here the Abstract

Posted in: News, Remuneration