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Cattaneo could receive up to 40 million via special award; telco also reduces board size, adds ‘TIM’ to corporate brand.
Telecom Italia’s shareholders this week approved a hefty payout to chief executive Flavio Cattaneo, should he succeed in effecting a speedy turnaround of the company.
Cattaneo could receive a bonus of up to €40 million should he exceed the targets laid out in the the Italian incumbent’s 2016-2018 business plan. The telco is willing to pay out €55 million in total, with the balance going to other company managers nominated by Cattaneo. The special award will be paid 80% in shares and 20% cash.
"The majority of shareholders who attended the meeting expressed a positive opinion of this extraordinary remuneration, which is intended to pursue a change in management and a relaunch of the company, linked to exceeding the objectives of the Business Plan 2016-2018," Telecom Italia said, in a statement.
In addition, shareholders approved Telecom Italia’s policy with regard to remuneration of directors and key managers. As a result, Cattaneo receives an annual salary of €1.4 million, with bonus payments ranging from an additional 50% to 150% of that sum, again based on reaching certain targets.
According to the financial newswires, there has been significant criticism of Telecom Italia’s bonus plan.
Bloomberg noted that internal auditors opposed the special bonus, as did small investors represented by Asati. The telco also had to explain itself to stock market regulator Consob.
Meanwhile, Reuters said proxy advisers Glass Lewis and ISS had urged shareholders to reject the special award on the grounds that it was linked to short-term results and that a bonus would be paid even if Cattaneo were to leave his role early.
The newswire added that the vote was heavily influenced by Vivendi, which holds almost 25% of Telecom Italia. The plan was backed by Vivendi CEO Arnaud de Puyfontaine, who became Telecom Italia’s deputy chairman a month ago.
Shareholders representing 60.48% of Telecom Italia’s ordinary share capital voted at the meeting. 37.24% voted in favour of the special award and 22.94% against, according to documents shared by the telco.
Incidentally, the final total paid out under the special award will be determined by calculating the difference between key financial targets in the years 2016, 2017, 2018 and 2019 and the actual results achieved; 2019 does not come under the strategic plan, but the figures used will match those given for 2018. Cattaneo and other top executives will receive a maximum of 5.5% of the difference, split 4%/1.5% and capped at €55 million.
Votes on other resolutions were more cut and dried.
Shareholders representing 59.56% of the company’s share capital assented to a reduction in the number of directors on the board to 16 from 17. Late last year Vivendi successfully lobbied to have the Telecom Italia board increased to 17 members from 13, including four of its own choosing. The reduction comes about as a result of the resignation of former CEO Marco Patuano; his replacement Cattaneo was already a director. Telecom Italia said it does not see the need to add a new director.
Finally, 60.22% of shareholders voted in favour of bylaw amendments that add the TIM name – now used for all fixed and mobile services – to the telco’s corporate brand. "Consequently, the company is called "Telecom Italia S.p.A." and alternatively "TIM S.p.A.," the telco explained.
