It is never too late to gain legitimacy and ECGS is glad to see that efforts made for better governance at the top of Italian companies are not made in vain.
On 11 Januaryth, the Italian newspaper il Fatto Quotidiano published the report drafted in April 2013 by an independent advisor, Prof. Stefano Loconte, who was hired by the Rome prosecutor’s office to verify the legality of the indemnity leave paid to the former UniCredit CEO, Mr Alessandro Profumo. The document confirms all concerns formulated by Frontis Governance and ECGS two years ago.
On 27 Januaryth, 2012, ECGS and Frontis Governance formally asked the UniCredit Board of Directors to make every effort to recover the excess payment made to the former CEO. In September 2010, Mr Profumo received €40.5 million, of which €36.5 million represented severance payments. Such an excessive amount was not justified by the bank's performance and did not comply with the European Commission's 2009 Recommendations (which limited termination payments to the equivalent of two years’ non-variable compensation). Furthermore, Mr Profumo's severance contradicted UniCredit's 2010 remuneration policy, which provided for an indemnity leave equivalent to 3 years of total compensation. According to Frontis Governance and ECGS’ assessment, the overpayment amounted to approximately €27 million. UniCredit's response, received on 16 Februaryth, 2012, a report has just been published of the Chairman’s speech at the last AGM, which generally justified the legal validity of the severance pay.
Two years later, it appears not only that the ECGS’ initiative was clearly justified, but that the Bank of Italy even anticipated the proxy advisers. Prof. Loconte’s document quotes formal requests sent by the Italian banking Authority in December 2010, contesting the UniCredit’s severance clause: as stated by ECGS, the equivalent of three years’ global compensation was not in line with the EU Recommendations. Furthermore, the Bank of Italy contested the inclusion of all potential incentives in the severance payment and that no deferral clauses were provided. Following the generic answer provided by UniCredit, very similar to the one sent to Frontis Governance and ECGS, the Bank of Italy just asked for more information and confirmed all the remarks.
The letter sent by Frontis Governance and ECGS did not question the legal validity of Mr Profumo’s severance payment, which was also confirmed by Prof Loconte’s document. Rather, it requested UniCredit to take strong action, aimed at regaining its shareholders’ trust. If the company does not comply with its own policies, without providing adequate justification, how can shareholders trust the future remuneration policies to be voted on at general meetings?