The salaries of the Spanish top executives they are almost as safe as those of the officials. Yes, he has read well. "Whatever happens in the company, the CEOs will charge the same, which leads them to make conservative decisions that generate less value for the shareholder," says Juan-Pedro Gómez, a professor at IE Business School.
This researcher has studied, commissioned by the National Stock Market Commission (CNMV), the relationship between the remunerations of the executive directors of the 42 companies listed on the Ibex 35 between 2013 and 2017 and the evolution of the value of these companies on the stock exchange, that is, the alignment with the objectives of its shareholders. And the conclusion is blunt: "The executives show an exposure to the profitability of the company very low". When the value of the company increases 1,000 euros, the expected wealth of the CEO rises 14 cents. Something that contrasts with what happens in the United States, he explains, where they receive $ 3.25 for every $ 1,000 appreciation.
The main reason that explains this poor link between the salaries of senior managers and the profitability of companies is that in Spain the weight of the bonuses in its remunerative package it represents 33%, the second highest percentage of the study, behind Germany (40%), and well ahead of the continental average, 18%, and even the American (22%). And, although this variable salary in theory is linked to the short and long term, the value of the short is much higher.
However, restricted actions (more than one year) u stock options (which usually extend to three- to six-year horizons) barely represent 5% of the salary package of the Ibex CEOs, compared to 19% of the European average or 42% of the US. Therefore, except in the case of executive directors who receive this type of medium and long-term incentives, there is no evidence that the remuneration varies significantly with the price of the company's securities, according to Gómez, since they are the restricted actions and the options that expose them to the evolution of the company in the stock market. And only one in ten administrators receive them. Those CEOs who, given a hypothetical 100% revaluation in the company, would obtain between 900,000 and 3.1 million additional euros. With each 1% increase in profitability, they would charge 10.5% more.
This means that in Spain the incentives for decision-making more than a year ago are very scarce, with which the rotation of talent is very poor and the competitiveness to achieve it also, appreciates the IE professor, who attributes it to the inbreeding and the high number of companies of family origin, where there is no tradition of competition between senior officials, which is not played by the shareholder.
The Spanish case is very unique, in the words of Gómez, because it is a country where the contributions to savings systems (pension plans or life insurance) are very high, on average they add up to 10.6% of the salary, but they can reach 15%, unparalleled in any other country. These incentives move executives to take more conservative decisions, to take fewer risks and, therefore, to generate lower value for companies.
The CEOs of the Ibex firms earn an average of 4.1 million euros per year, of which the salary is one million, the fixed remuneration 91,000 euros, the short-term variable 972,000, the long-term variable 173,000, the savings systems 934,000, compensation 168,000, gross benefits of shares and options 678,000 and subsistence allowances, incentives to membership of board of directors and others, about 99,000 euros. Figures that, of course, have nothing to do with those perceived by officials. Although only for 1% of the sample, the study indicates, restricted shares and options are important (they account for almost half of the emoluments), since the remuneration is concentrated on the salary and the short-term variable bonus in the majority of the cases. And it is the larger companies that best pay their executive directors and, above all, their CEOs.
What has to change so that the first swords of the Ibex 35 firms and their decisions share their fate with that of the shareholders? For Juan-Pedro Gómez, it is clear: extending the term for the bonus collection would help to encourage the creation of long-term value, which today is very marginal.
Effects of the crisis
The Great Recession already contributed that recipe, which was imposed between national and international regulators. And that, in the opinion of the experts of the consultancy Willis Tower Watson and of Corporance Asesores de Voto, in the last five years is being noticed in Spain, where the weight of the variable salary to more than three years is being balanced with respect to the annual in the compensation. "We probably need more time for that correlation to be greater," says Cristina Martín, director of compensation for the consultancy. Financial entities are required to defer 60% of the bonus for up to five years, says Juan Guerrero, Willis senior manager, who alludes to the advancement of the incentive system and transparency by linking remuneration to business results. according to the European Union guidelines.
Some of the Ibex companies where the multi-year payment (as of three years) acquires strength with respect to the annual are Merlin, Indra, Iberdrola and Amadeus. "Although the short-term bond has always been a majority in Spain, its weight is decreasing," adds Guerrero. That is why they are often penalized by proxy advisors or voting advisors, who recommend voting against them at shareholders' meetings. These are the cases of Bankia, CaixaBank and Ferrovial (their variable remuneration depends almost exclusively on annual performance) or of ACS and Mapfre (they do not report on the link between the variable and business performance) or Grifols (it does not include long-term incentives), According to ECGS analysts, represented in Spain by Juan Prieto, head of Corporance, which stands out on the positive side of Sabadell, where executives have dispensed with their bonuses for not having achieved the expected results.
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