UniCredit survives shareholder rebellion over Orcel pay

Andrea Orcel will become one of the highest-paid bankers in Europe after a revolt among UniCredit shareholders failed to block the Italian bank’s pay policy.

The vote at the lender’s AGM on Thursday morning was passed by a slender margin, with 54 per cent of shareholders who attended the meeting voting in favour of Orcel’s potential €7.5m pay package, and more than 40 per cent voting against.

The meeting confirmed former UBS investment banker Orcel as chief executive of Italy’s second-biggest bank by revenues, heralding his return to the centre stage of European banking two years after his aborted attempt to run Santander.

Influential governance advisers Institutional Shareholder Services and Glass Lewis had recommended that shareholders vote against UniCredit’s remuneration policy due to the size of Orcel’s potential pay package.

Proxy advisers carry much sway with passive investors and large institutional investors, who typically follow their recommendations when voting their small stakes in international businesses.

Under the pay policy, Orcel will earn a salary of €2.5m and be awarded as much as €5m in company stock in 2021, regardless of his or the bank’s performance.

The total annual pay of €7.5m would make him Italy’s highest-paid banker and among the most generously rewarded of his European peers.

Orcel’s pay has previously been a contentious issue. A fight over pay and profile torpedoed his move to Santander, and he launched a €112m lawsuit against the Spanish lender’s decision two years ago to withdraw an offer to make him chief executive. The case has still not concluded. A public hearing into the dispute is set for May 19 after being delayed several times.

Orcel’s compensation package is markedly higher than that of his predecessor, Jean Pierre Mustier, who stepped down in February. The Frenchman reduced his fixed pay by 40 per cent to €1.2m when he joined in 2016.

Mustier also voluntarily cut his salary last year by a quarter in response to the pandemic and gave up €2.4m in bonuses. His total pay package for 2020 was €911,000.

“UniCredit’s generosity towards its new CEO clashes with the current global context, European Central Bank recommendation on executive compensation, and the sobriety of the Mustier era,” ISS said in its report recommending shareholders vote against the remuneration policy.

But a top 10 shareholder in UniCredit countered that given Orcel was relinquishing tens of millions of dollars in deferred pay from his previous employer, UBS, to take on the UniCredit role, they voted in favour of the pay deal.

“We are normally critical of boards on pay issues, but in this case, we can’t fault them,” they said.

“From next year, once they change the pay plan, his compensation should be based on targets that we all agree on. Given the circumstances, we need to be pragmatic now.”