Overview

Executive Compensation

incentives to grow

According to our Observatory on Corporate Governance Excellence in Italy, the correlation between the trend in variable  compensation and corporate performance is still low and only 26% of FTSEMIB-quoted companies declare in their annual reports the link between performance and bonuses. Current debate is too focused on the total amount of compensation and ignores the most relevant aspect which are the rules underlying the remuneration and incentive plans of corporate heads and top management.

Executive Compensation
Read the article, Effective Governance, ETHICAL BOARDROOM, Marco Visani, 2018

In recent years, remuneration for executives and managers with strategic responsibilities has been one of the aspects of the corporate government system most subject to market scrutiny.

If well-designed, the remuneration system (how much and how a resource is paid) represents a fundamental ingredient to bring the interests–and therefore the behavior–of executives and managers into alignment with those of stockholders, and to maximize the probability that strategic goals are followed.

Succinctly put, a good incentive system (whether short- or long-term) must be self-financing through improved results!

Setting an effective pay policy assumes knowledge of what the market wants, of good practices and rules in constant evolution.

Our approach is based on long-standing and solid experience in the field, our on-going research activities and regular contact with leading market stakeholders: these factors make it possible for us to offer clients solutions that are state-of-the-art.

Remuneration Policy Check-Up

Identification of the strong points and areas for improvement of client remuneration systems as compared to a panel of benchmark companies or in terms of market desires (institutional investors).


How much to pay

Support in establishing total remuneration and the retributive mix of top management, as well as development of custom benchmarks to establish congruity of remuneration for members of the Board.


How to pay

Design of short- and medium/long-term incentive systems.

Operator in the telecommunications sector

Assistance for the Nomination and Remuneration Committee and validation of its Executive Compensation policy

As advisor to the Nomination and Remuneration Committee, The European House – Ambrosetti verified the compensation policy for top management (president, CEO and managers with strategic responsibilities).

Specifically, The European House – Ambrosetti produced three outputs:

  1. Comparison with best practices (national and international)
  2. Bringing compensation policies into conformity with the evolution of the legal provisions in this area
  3. Revision of the retribution system architecture on the basis of the strategic plan for the company’s top management

Operator in the energy sector

Design and implementation of a 3-year incentive plan

In light of the launching of its new industrial plan, the company felt the necessity to ask the assistance of The European House – Ambrosetti in the design, approval and communication of a 3-year incentive plan for a select group of managers, given the requests of the proxy advisors.

The European House – Ambrosetti provided the company with support in the following activities:

  1. Definition of performance parameters to which to link bonuses
  2. Preparation of an opinion (accepted by the company) designed to exclude shareholder executives from the incentive plan
  3. Selection of the incentive vehicle
  4. Definition of the incentive strategy
  5. Simulation of the budget to cover costs
  6. Presentation of the final proposal to the BofD for approval.

Approfondimenti:

Come valutare la paga dei manager
Il Sole 24 Ore, July 23, 2015