FIAT and FIAT Industries: possibly the worse remuneration policy in Italy!

FIAT and FIAT Industries: possibly the worse remuneration policy in Italy!


ECGS recommends shareholders to set a more demanding course for the Fiat Group and to oppose to the remuneration policies of Fiat and Fiat Industries at their up-coming General meetings of 9 April 2013.


Fiat and Fiat Industries shareholders are called to a consultative vote on the Company's remuneration policy, possibly the worse Italian remuneration policy according to the ECGS local Partner Frontis Governance.


The CEO's long-term incentive plan is not linked to any performance condition: Mr. Marchionne will receive 7 million shares in 2015 from Fiat only subject to his continued professional relationship with the Group. The performance criteria of the annual bonuses are not disclosed, the maximum level reachable by the variable component exceeds six times the base salary and the severance payments may be equal to at maximum five times the CEO's base salary. Hence ECGS recommends opposition.


Besides the Fiat Board of Directors has the authority to grant discretionary bonuses to the executives but the terms of the discretionary bonuses are not disclosed. In addition to his EUR 2.3 million base salary and EUR 2 million variable salary the Fiat CEO, Mr. Marchionne, is a beneficiary of a part of the Retention LTI plan estimated at EUR 14 million for 2012, so that 100% of his long-term incentive is not linked to any performance condition in a plan which does not provide for any lock-up mechanism after the shares are granted.


The maximum amount reachable by the annual cash bonus for Fiat managers exceeds our 100% limit at 2.5 times the base salary, while the LTI generally represents at least 60%-70% of the variable component.  


On January 2012, Mr. Marchionne received further 4 million Fiat Industrial's shares resulting from the allocation of Fiat SpA's retention plan before the demerger. As the incentive was related to a Fiat SpA plan, included in Mr. Marchionne's 2010 compensation, the amount was not reported in the Fiat Industrial's remuneration report. As per the subsidiary's CNH NV stock option plan, six executives received on aggregate 384'956 options on CNH shares at a total fair value equal to € 12'468'725 (almost ten times the incentive paid on 2011).



All this leads Frontis Governance, the ECGS Italian analyst, to recommend resistance from investors to the inflationary remuneration policy at Fiat and Fiat Industry.



Paris, 28th March, 2013