On January 27th, ECGS (Expert Corporate Governance Service) sent a letter to the Chairman and the CEO of UniCredit asking them to undertake a strong action aimed at regaining their shareholders’ trust by making every effort to recall the excess money paid to Mr Alessandro Profumo at the time of its departure.
On September 2010, the former UniCredit’s CEO Alessandro Profumo received €36.5 million as severance payment for his resignation. Such egregious amount cannot be justified by the results achieved by the Company, nor by any internationally recognised good practice, nor by any regulatory recommendation. Worse, it contradicts UniCredit Group’s remuneration policies for the year 2010 and it questions the integrity of the Company’s information to shareholders.
Applying the EU Recommendation for the remuneration of directors of listed companies issued on April 2009, the total severance payments for Mr Profumo should have reached no more than €7,346,000 (or two years of fixed salary).
As per our estimate, the former CEO should repay to the Bank an amount equal to €36.5 million received as “incentive to leave” minus €7,346,000 he duly deserved as severance payment, net of taxes already paid by the former CEO on the original amount received. Of course, its should be left to UniCredit’s Board special committee to assess the correct level of the amount to be requested.
On February 16th, ECGS partners received a formal answer from UniCredit, signed by the Chairman and by the Head of HR which consisted in the Board initial statement during the last AGM held on April 2011 about the legal validity of the payment. Since ECGS was not questioning the legal regularity of the final indemnification, this answer appears inadequate. As it is clear that the severance payment was the result of a settlement between the Board and the former CEO, we believe that shareholders cannot accept a Compensation Policy allowing for such unjustified payment. Furthermore, as per the “FSB Principles for Sound Compensation Practices”, issued on September 25th 2009 (a year before Mr Profumo’s resignation): “Existing contractual payments related to a termination of employment should be re-examined […]; prospectively, any such payments should be related to performance achieved over time and designed in a way that does not reward failure”. Therefore, even in case the €36.5 million severance payments would have been provided by the initial CEO’s contract, it should have been revised in line with the new principles.
If not reformed, we consider that the payments made to Mr Alessandro Profumo, totally contradicting the Group’s remuneration policies, will also undermine the reliability of the new remuneration policies subject to shareholders vote at the next General Meeting. The suggested positive action, if undertaken by the Board of Directors, would also ensure the shareholders that the voted policies would be actually applied.
On November 14th 2011, the Board of Directors of UniCredit approved the 2011 third quarterly results showing €9.3 billion net losses mostly due to €10.16 billion write off of investments decided during Mr Profumo’s management period. Over the last three years, UniCredit has been forced to ask and obtain considerable financial support from its shareholders for €14.5 billion thanks to three rights issues: €3 billion in January 2009, €4 billion in January 2010 and €7.5 billion with the last share capital increase ended on January 27th.