New UniCredit CEO to earn more than double his predecessor, and investors are angry

Milan — Before Andrea Orcel takes the helm of UniCredit this week he’s already in the midst of controversy on a topic that’s followed him around in recent years: his pay.

The proposed €7.5m in annual compensation for leading the Milan-based lender has drawn criticism from top investor advisers, which are advocating shareholders to vote against the pay package on April 15. Proxy firm ISS has pointed out that Orcel’s fixed remuneration is more than double that of his predecessor, Jean Pierre Mustier.

Two years after a prospective move to Banco Santander fell apart over disagreement on compensation, Orcel is finding that even pay packages less than what he made as the chief investment banker at UBS can bring scrutiny. As the region’s economy continues to suffer the effects of the coronavirus pandemic, regulators have pushed back against excessive banker rewards, and even rebuffed Deutsche Bank’s proposed bonus payout.

“The compensation of the new CEO raises significant concern,” ISS wrote to investors, adding that the package “clashes with the current global context,” recommendations from the European Central Bank and the “sobriety” of the Mustier era.

Yet even with the proposed package likely to be signed off on by the majority of investors, Orcel will still probably miss out on tens of millions of dollars in deferred pay he’ll forgo from UBS in order to realise his ambition of becoming CEO of a top European bank.

The Rome-born banker was set to receive as much as $50m from UBS provided he stayed away from a competitor, and has already received around $20m since leaving the Swiss bank. As UniCredit has said it won’t compensate him for the rest, the move will mean Orcel will walk away from around $30m.

UniCredit’s 2021 remuneration policy to be voted on by shareholders proposes fixed pay for the CEO of €2.5m and bonuses of up to €5m, shifting the compensation into a range that outstrips most peers.

A rejection would leave the current policy in place, which allows the bank to pay the CEO up to €2.1m of fixed salary and the double as bonuses for a total annual pay of as much as €6.3m.

Bank executive pay can vary significantly from the maximums initially negotiated. Deutsche Bank CEO Christian Sewing earned €7.4m in 2020, much less than the €12.3m maximum that had been agreed.

International standards

Investors including Fondazione CariVerona and Fondazione CRT, which hold 1.8% and 1.7% stakes respectively, have backed UniCredit’s proposal as they consider it a package appropriate to attract suitable executive talent and in line with international standards.

Italy’s second-largest lender named Orcel in January to replace Mustier, who stepped down amid internal disagreements over strategy. Orcel inherits a leaner bank, but confronts challenges including pressure from the government to take over troubled lender Banca Monte dei Paschi di Siena and doubts over the lender’s route to growth. The executive is set to give his strategic priorities for the firm in the fall, according to an analyst briefing.

UniCredit has been one of the worst performing bank stocks in Europe over the past year, and recently lost the crown as Italy’s largest lender after Intesa Sanpaolo bought smaller rival UBI Banca.

Bloomberg