Ethos Services, network partner ECGS, has recently published the Seventh annual remuneration report of executives from the top 100 Swiss listed companies. The study highlights a Calo del 6% in remuneration in 2011 compared to the previous year. The figure, however, is strongly influenced by Financial sector, where executives saw their pay plummet as many as 23%, compared with a 5% increase in other sectors. Furthermore, the reduction mainly affected non-executive chairmen, whose earnings plummeted by 17% in 2011 (standing at 1.12 million Swiss francs, approximately €920,000). The Chief Executive Officers have experienced a significantly smaller reduction (-6%) of emoluments, which stood at CHF 3.75 million, corresponding to approximately €3.1 million at the year-end exchange rate.
Colleagues of Ethos individuano nel“Say-on-pay”namely in submitting remuneration to shareholder approval, one of the most beneficial factors for containing company costs absorbed by top management. In Switzerland, the vote on remuneration policies Neither mandatory nor binding. Fewer than half of the issuers analysed (49) included it on their 2012 AGM agenda, receiving 14.4% of votes against (a slight increase compared with 2011). Despite its limited uptake, the mere possibility of greater shareholder control would appear to have significantly improved transparency and structure on directors' remuneration, encouraging companies to engage in more open and profitable dialogue with investors.
The comparison with Italy
To allow for a consistent comparison with data collected in Italy by Frontis Governance last May, relating to 38 FTSE MIB companies, we can isolate the data of 44 Swiss companies with larger capitalisation, belonging to the SMI and SMIM indices.
- In the sample limited to 44, the Swiss CEOs they have undergone a reduction of 9% of fees, while top executives of Italian companies the larger capitalisation have seen increase their overall remuneration of 15.4%.
- The average remuneration of Italian CEOs reached €3.27 million in 2011, still lower than the approximately €3.9 million of their Swiss colleagues (precisely 4.77 million Swiss francs).
- The pay structure is much the same in the two countries, with the Approximately 60%, represented by bonuses and bonuses, whilst the fixed component accounted for 40% of total remuneration.
- The large difference in the trend of remuneration is due to variable components, which should be linked to the results achieved and are a 45% increase for Italian CEOs (compared with a reduction in the fixed fee under 11%), whilst they are down for our Swiss colleagues.
- A significant piece of information concerns the Financial sector, which was particularly hit by the crisis in 2011, especially in Italy: while top banking executives Italians have seen their average earnings remain stable in 2011 at €2.19 million (+1%), still well below the amount received by the Swiss colleagues (circa €3.37 million), which however resulted in a fall of as much as 26%.
- The different trend in remuneration occurred despite significantly worse performance for Italian financial companies: in 2011 the Total Shareholder Return (i.e. the value created for shareholders, derived from the share price performance and dividends paid) amounted to -31.3% in Italy, compared with the -16% recorded by the peers Swiss.
- The difference in fixed remuneration levels could be explained by the different sizes of Italian and Swiss financial companies, whose market capitalisation is, on average, 40% higher (€12.9 billion compared with €7.7 billion).
as was correctly highlighted by colleagues from Ethos, allowing shareholders to express themselves on remuneration policies can in itself Start a virtuous cycle aiming to improve the transparency and structure of these remuneration arrangements. Indeed, the levels of transparency of the remunerations paid in Italy they are among the highest in Europe (thanks to new regulatory forecasts), but to greater transparency It doesn't match a general adjustment of remuneration policies, still characterised by insufficient incentives related to the results achieved.
The significant differences in remuneration policies are not reflected in the shareholders' meeting behaviour, which has shown levels of disagreement even lower in Italy, equal to 12.6% of voters (including abstentions) compared with 14.4% at Swiss general meetings.
How can such a difference in assembly behaviour, which from the data presented would seem decidedly paradoxical, be explained? Probably, in addition to the greater concentration of ownership in Italy, the cause can be sought in the different Shareholder composition. On average, over two-thirds of minority shareholders present at Italian general meetings are large foreign funds. This category of investors, who must follow thousands of issuers, necessarily refer (internally or through international advisors) to very strict voting guidelines, which are often strongly geared towards placing greater emphasis on formal aspects and relating to the transparency requirements for remuneration reports, rather than to the’actual application of remuneration policies. If we consider that Italian remuneration reports are among the most transparent in Europe, this explains the paradox whereby Italian remuneration policies are more “appreciated” by voting shareholders, despite continuing to to disregard the fundamental principle the alignment of management’s interests with those of the shareholders themselves in the long term.