It is never too late to gain legitimacy and ECGS is glad to see that efforts made for a better governance at the top of Italian companies are not made in vain.
On January 11th, the Italian newspaper il Fatto Quotidiano published the report drafted on April 2013 by an independent advisor, Prof. Stefano Loconte, hired by the Rome prosecutor’s office to verify the legality of the indemnity leave paid to the former UniCredit’s CEO, Mr. Alessandro Profumo. The document confirms all concerns formulated by Frontis Governance and ECGS two years ago.
On January 27th, 2012, ECGS and Frontis Governance formally asked the UniCredit’s Board of Directors to make every effort to recall the excess money paid to the former CEO. On September 2010, Mr. Profumo received 40.5 million Euros, of which 36.5 million Euros as severance payments. Such egregious amount was not justified by the results achieved by the bank, and it failed to comply with the 2009 European Commission’s Recommendations (that limited the termination payments to the equivalent of two years’ non-variable compensation). Moreover, Mr. Profumo’s severance contradicted the UniCredit’s 2010 remuneration policy, that provided for an indemnity leave equal to 3 years of total compensation. According to Frontis Governance and ECGS’ appraisal, the extra-payment amounted to approximately 27 million Euros. The UniCredit’s answer, received on February 16th, 2012, just reported the Chairman’s speech at the last AGM, generically justifying the legal validity of the severance paid.
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 on 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, that was confirmed also by the Prof. Loconte’s document, but it requested UniCredit to undertake a strong action, aimed at regaining its shareholders’ trust. If the company does not comply with its own policies, without providing an adequate justification, how can shareholders trust the future remuneration policies, to be voted at general meetings?