The board of directors at UniCredit, Italy’s largest bank, has proposed a significant pay raise for its CEO Andrea Orcel. According to the plan, Orcel’s salary would be raised by 30%, a huge increase compared to the previous year’s pay. The move has sparked heated debate in Italy and beyond over the appropriateness of such a large salary increase in the midst of an economic crisis. On one hand, some argue that it is necessary to motivate and retain top talent amidst tough competition from other banks. On the other hand, others question whether such an increase is fair given the current state of the Italian economy. In this blog post, we will explore both sides of the issue and delve into what lies ahead for UniCredit and its CEO Andrea Orcel.
UniCredit’s Board Proposes 30% Pay Rise For CEO Andrea Orcel
UniCredit’s board has proposed a 30% pay rise for CEO Andrea Orcel, according to a filing with the U.S. Securities and Exchange Commission.
Orcel’s total compensation for 2018 would be 5.2 million euros ($6.1 million), up from 4 million euros the previous year. His base salary would remain at 2 million euros.
The raise comes as UniCredit prepares to spin off its bad loans into a separate “bad bank” and launch a major share sale to bolster its capital levels. The share sale is expected to raise around 13 billion euros.
UniCredit’s board says the pay raise is justified because of the “significant transformation” the bank is undergoing. The board also notes that Orcel’s compensation is “in line with his peers.”
Orcel has been credited with turning around UniCredit’s fortunes since taking over as CEO in 2012. He has overseen a series of asset sales and cost-cutting measures that have helped the bank return to profitability.
The Reasons Behind the Decision
The board of directors of UniCredit has proposed a pay rise for CEO Andrea Orcel, citing the need to align his compensation with that of other bank CEOs. The move comes as the Italian lender tries to turnaround its fortunes after years of losses.
Orcel has been at the helm of UniCredit since 2016 and is credited with spearheading the bank’s restructuring plan. Under his leadership, UniCredit has sold off non-core assets, reduced its workforce, and raised billions of euros in new capital. The efforts have started to pay off, with the bank posting a profit in 2018 for the first time in four years.
Now, the board believes it’s time to reward Orcel for his efforts by increasing his base salary from €2 million to €2.5 million. In addition, they are proposing a bonus of up to €5 million, depending on UniCredit’s performance over the next two years.
The decision to give Orcel a pay raise comes as other European banks are under pressure to rein in executive compensation. Just last week, Deutsche Bank announced that it would not be awarding any bonuses to its top executives for 2018 after coming under fire for previous years’ payouts.
Critics argue that paying Orcel more money is not the answer to UniCredit’s problems. They point out that he already ranks among the highest-paid bankers in Europe and that such a move could anger shareholders who have seen the value of their investments decline sharply in recent years
How shareholders and investors feel about the move
According to Reuters, some UniCredit shareholders and investors are not happy about the board’s proposal to give CEO Andrea Orcel a pay rise. One shareholder said that the move was “totally inappropriate” given the current economic climate. Another investor said that Orcel didn’t deserve a pay rise because the bank’s share price had fallen during his tenure.
The potential implications of the pay rise
UniCredit’s Board Proposes % Pay Rise For CEO Andrea Orcel
While the details of the pay rise have not been made public, it is understood that the board is proposing a significant increase for Mr. Orcel. This could have a number of implications for UniCredit, both positive and negative.
On the positive side, the pay rise would be a show of confidence in Mr. Orcel’s leadership, sending a strong signal to investors, customers, and employees that he is the right person to steer UniCredit through challenging times. It would also be an opportunity for UniCredit to further differentiate itself from its peers in terms of executive compensation.
On the negative side, there is a risk that the pay rise could be seen as excessive, particularly in light of UniCredit’s current financial situation. This could damage the bank’s reputation and make it harder to attract and retain top talent. There is also a risk that shareholders could vote against the pay rise at UniCredit’s next AGM.
Conclusion
The proposal of a 30% pay rise for UnCredit’s CEO Andrea Orcel has been met with criticism and opposition from shareholders, who believe that this increase is too large. While it is up to the board to decide what they think is fair compensation for their CEO, shareholders have an important role in ensuring that executive compensation remains at a reasonable level. It will be interesting to see what happens next as the decision on whether or not to accept the proposed raise ultimately lies with the company’s stakeholders.
