The 2022 update of the Frontis Governance guidelines for Italian companies is available in the section Documents & Links of the site. In the same section of the site, the following compliance documents with Legislative Decree 49/2019 transposing Shareholder Rights Directive II are also available:
Annual Report pursuant to Article 124-octies of the Consolidated Law on Finance relating to 2021
Dialogue activities with listed companies conducted in 2021
Report on conflicts of interest
In the archive page site you can also consult all transparency and compliance documents published by Frontis Governance since 2015.
What's new in the 2022 Guidelines
As every year, the governance principles and voting policies were defined after discussions with Frontis Governance partners, in particular the European proxy advisor Proxinvest, on the basis of the observation of practices encountered during the last shareholders' meeting season and dialogue activities with Italian listed companies.
In addition to mostly formal changes aimed at further clarifying Frontis Governance's position on various aspects of corporate governance, the following are the main changes related to Remuneration:
- In the Voting Policies, the analysis of the remuneration paid (non-binding vote on the second section of the Annual Report) has been separated from the analysis of the remuneration policies (binding vote on the first section of the Report), in order to make them easier to read and to better clarify the methodologies used by Frontis Governance.
- Remuneration policiesIt has been specified that the voting recommendation can also be favourable to policies that are not aligned with Frontis Governance principles, if largely ameliorative changes are proposed.
- Possibility of policy exceptionsFollowing the transposition of Shareholder Rights Directive II, issuers must include in the Remuneration Report the elements of the policy from which exceptions can be made. In the Frontis Governance guidelines, it has been specified that a negative assessment is possible if the possible causes for deviations from the policy, the procedures for assessing and approving such deviations are not clearly stated, excessive discretion is left to the Board of Directors, or no clear limits are defined for possible changes to the various remuneration components.
- Changes to variable remuneration during vestingIt has been specified that the recommendation to vote on the remuneration paid may be opposed if changes to the performance targets, although justified by exogenous and unforeseeable events, are not adequately justified by the Board of Directors or are not accompanied by a revision of further features of the plan (e.g. through a reduction of the target or maximum level of the incentive, the lengthening of the performance period or the deferral of a significant portion of the incentive subject to further performance criteria).
- Severance payA link has been made between allowances paid and the length of the recipient's tenure and performance. The Frontis Governance recommendation may be against compensation that is in line with market practice but not justified by the length of the executive's tenure (e.g., compensation is equal to two years' total compensation, but the beneficiary has held the position for less than five years), or if the relationship has ended due to performance assessed as largely unsatisfactory by shareholders. In this case, the assessment only concerns the vote on the remuneration paid, and not the remuneration policy.
- Long-term incentive plansIt has been clarified that the provision of an early vesting of the entire incentive in the case of a change of control, i.e. the possibility of paying the entire amount of the incentive if the reference shareholder changes, may lead to a negative assessment of the plan.
Frontis Governance - Corporate Governance Principles and Voting Guidelines 2022
