In the final stretch of spring and early summer, the vast majority of listed companies hold their shareholders' meetings. An annual event where, theoretically, investors have the ability to have a voice and a vote to express how they see the development and management of a company. A vote that, on many occasions, is of a consultative nature and, although it has no significance, it does reflect his opinion. This happens, for example, with the votes on the remuneration reports of the boards of directors on the salary received in the previous year.
Votes that, in recent years, have become more relevant, because there are companies, where opinions have grown against. Also, because the voting advisory firms (known as 'proxy advisors', who recommend to the shareholders in what sense they should pronounce themselves) have put the remuneration in focus, especially in the last two yearsbecause some companies reduced the salary of their management as a reaction to the crisis caused by the pandemic, but not all.
"It is expected that the remuneration report includes, among other aspects, the amounts paid to executivesthat are aligned with the performance of the company, that discloses the incentive objectives and to what extent they have been met and that explains whether any clause has been used to adjust the remuneration", breaks down the 'proxy advisor' ISS, explaining how make your recommendations.
This firm has urged investors to vote against the remuneration of Irishman Damian Gammell, CEO of Coca-Cola Europacific Partners (CCEP), the company chaired by the Spanish Sol Daurella, whose remuneration, on the other hand, does not question. The reason, according to ISS, is the bonus received by the CEO during a year that was still marked by the management of the coronavirus.
During 2021, the top executive of the soft drink bottler in most European markets received 7.67 million pounds (8.95 million euros at current exchange rates). Of these, 1.17 million pounds correspond to his base salary. The main sum, 3.5 million, was a cash bonus; and another 2.7 million pounds, long-term incentives in shares of the multinational.
A year earlier, Gammell received 5.5 million pounds, as broken down by CCEP in the annual report that it has sent to its shareholders on the occasion of the meeting held this Friday, May 27. In both years, 2021 and 2020, Sol Daurella received 591,000 pounds each year. Daurella controls 7% of the bottling company's shares, according to the breakdown of shareholders reflected in the 'proxy'.
ISS recommends that shareholders vote against the remuneration report. Expression that is of an advisory nature, according to the regulations of the United Kingdom, where CCEP has its headquarters. The 'proxy advisor' argues that the bottler's incentive plan was subject to the achievement of objectives linked to earnings per share and the return on investment in capital (ROIC) of the multinational between 2019 and 2021.
"Despite a strong performance in 2019 and a strong recovery during 2020 and 2021, the impact of COVID-19 has resulted in targets for achieving the long-term incentive threshold not being met," the firm said. the argumentation of the CCEP remuneration committee. "In this sense, the commission has decided to determine that an award level below the objective can be applied [de resultados] of 45%, resulting in the delivery of a long-term CEO incentive of £2.766m."
The ISS voting advisor also indicates that the remuneration committee "considered it appropriate" to modify the criteria for granting this long-term incentive plan "despite the significant challenges that have had to be faced as a result of the pandemic, that were out of control" of the executives. This action is not considered in line with the criteria of good practice. "The impact of this decision has been significant, with the delivery of incentives equivalent to 2.35 times the CEO's salary and constituting 36% of the total that he received in 2021." For this reason, ISS indicates, it recommends voting against.
The soft drink giant's bottler has responded to this vote recommendation. CCEP tells elDiario.es that its "board of directors and the executive team firmly believe that the remuneration decisions made during the year were in the best interest of the shareholders" and the "incentive goals" of "all its potential beneficiaries". Also so that "the performance during the COVID-19 crisis was reflected, which made it possible to generate long-term value."
CCEP earned 988 million in 2021, practically double that of the previous year. It was the year in which he closed the purchase of Coca-Cola Amatil Limited, the Australian bottler. An acquisition worth 9,828 million Australian dollars (about 6,500 million euros at current exchange rates), which was the reason why it changed its previous name, Coca-Cola European Partners.
The company has also responded to the ISS voting proposal through a statement sent to the National Securities Market Commission (CNMV), where it breaks down and argues the reasons for the remuneration. It indicates to the supervisor of the Spanish market - where CCEP is listed, although it is based in the United Kingdom - that the share plans are designed to encourage the commitment of executives to the company and thus achieve the best possible financial results, also in a context such as that of COVID.
That voting proposal by ISS is not unanimous on the part of the voting advisors. Another of the international firms that advise shareholders when voting, Glass Lewis, recommends voting in favor of the remuneration of the CEO of Coca-Cola Europacific Partners and points out the positive behavior of the multinational during these last two years.
In Spain, the vote on remuneration reports is also consultative, but it is a thermometer of what shareholders think. This is what has happened this year, for example, with Telefónica. At this year's meeting, 53% of the shareholders voted in favor of the report, which included a bonus of 1.9 million for its president José María Álvarez-Pallete; and 1.6 million for the CEO of the 'teleco', Ángel Vilá. A year earlier, investor support exceeded 88% and in 2019 it was close to 90%. In the case of the operator, this year, both ISS and Glass Lewis recommended voting against the report.
In the Spanish listed companies, as a whole, about 60% of the recommendations focus on a vote in favor of the remuneration report and, around 40%, against, according to the director for Southern Europe of Glass Lewis , Alex Bardaji. As for where he sees room for improvement, the person in charge of the 'proxy' points out greater transparency in aspects related to remuneration and in adapting the non-financial 'reporting' (economic information beyond the data) to the particularities of each sector .
Outside of Europe, one of the most significant votes this board season has been on JPMorgan Chase's pay report, also on the salary of its CEO, Jamie Dimon. In 2021, the American investment bank awarded its chief executive a share plan worth 52.6 million dollars and the votes in favor of this salary policy only reached 31%. In the case of the COO, Daniel Pinto, the incentive plan was 27.9 million dollars.
“The excessive compensation of the CEO and COO in the midst of a performance [del banco] lukewarm concerns about the company's compensation program worsen, "said Glass Lewis regarding the bank's board, according to what was collected Bloomberg. "Shareholders should appreciate the repeated disconnect between executive pay and bank behavior over the last nine years," she sums up.