(Corrects full name of ISS in first paragraph)
MILAN, April 19 (Reuters) - Influential governance adviser Institutional Shareholder Services (ISS) has taken aim at a sharp increase in fixed pay for the chief executive of Italy’s BPER Banca, as well as changes in Intesa Sanpaolo’s long-term incentive plan.
The latter drew a negative recommendation also from rival Glass Lewis, which criticised the BPER CEO’s pay hike but stopped short of suggesting a rejection.
The pandemic has given a fresh urgency to long-standing investor concerns about executives’ pay. The latest flashpoint was last week’s narrow shareholder approval of new UniCredit CEO Andrea Orcel’s pay package, which both ISS and Glass Lewis had recommended rejecting.
In a report seen by Reuters, ISS urged BPER investors to vote against an increase in the 2020 base salary of CEO Alessandro Vandelli to 1.2 million euros from 850,000 euros.
“Such a quantum increase does not seem supported by a sufficiently compelling rationale,” it said.
BPER told ISS the move reflected the additional role of general manager taken on by Vandelli and the fact he was running a much bigger organisation following the acquisition of Unipol Banca and of around 600 branches, the report said.
BPER had no comment. The report welcomed a 25% cut to BPER’s bonus pool last year while noting the CEO’s bonus scorecard had been amended after the pandemic hit results.
In separate reports on Intesa’s upcoming AGM, both ISS and Glass Lewis backed all resolutions except changes to the long-term performance-based option plan which the bank said had become necessary because of pandemic-induced dividend curbs.
The changes to the plan, which assigns Intesa’s top managers shares over the course of five years starting from 2023, could cost up to an additional 65 million euros, the reports said.
Intesa said in documents prepared for the meeting the dividend restrictions impaired the plan’s functioning mechanism because options were unlikely to be “in the money” - meaning the strike price would be above the shares’ market price.
“The proposal is purely to keep shareholder and management interests aligned. It’s based on demanding dividend and share price growth conditions,” an Intesa spokesman said.
ISS said performance targets were unchanged despite the pandemic and Intesa stood ready to readjust the options’ strike price depending on actual dividends paid for 2020 and 2021.
Both Glass Lewis and ISS advised BPER shareholders to vote for board candidates proposed by institutional investors instead of those backed by shareholders Unipol Gruppo and Fondazione di Sardegna at Wednesday’s general meeting. (Reporting by Valentina Za; Editing by Kirsten Donovan)