Archive for February, 2015

Iberdrola`s Remuneration Policy

February 27, 2015 1 comment

As we said in our previous post (1), Spanish companies on their 2015 ordinary Shareholders Meeting are forced to hold a voting process on their Remuneration for 2014 and their Remuneration Policy, (the former is of course a yearly obligation, the latter should be held every three years). Nevertheless, in 2015, (as it is the first time such policy is to be voted), the regulation states that the report to be prepared by the Remuneration Committee to back the 2014 Remuneration could include the Remuneration Policy. So, when the non-binding vote on the 2014 Compensation is approved, the policy would also be approved. This is what Iberdrola has planned to do, instead of voting two separate reports, (which BBVA chose to do, and which in my opinion would have been better).


Let`s see what their Remuneration Policy, as included in the Remuneration Committee report is:

Main Principles. Read more…


Board tenure: some thoughts

February 14, 2015 Leave a comment

Is it fruitful to refresh a board only because directors have been at the job for more than a certain number of years? What criteria or rules should govern this approach to structure a board?

The (Canadian) Institute of Corporate Directors tries to shed light on the matter, outlining the two main factors usually brought forward by term limits proponents: (1) Read more…

BBVA`s Remuneration Policy, 2015

February 7, 2015 2 comments


1.- Regulatory picture

 As determined by Spanish legislation, the proxy to be voted by BBVA`s shareholders in their annual General Meeting includes a report of the Remuneration Policy, and also a report of last year`s remuneration packages. We will mainly refer here to the first one, (1).

 2.- Principles

 The Compensation policy is said to pursue “long-term value creation”, to align shareholders and employees`interests, while attracting and retaining talent, rewarding it with internal fairness, and assuring a prudent risk management.

An external firm has been hired to help determine the remuneration policy, (McLagan, a company inside the McLagan/AonHewitt group). Read more…

Paying for Long-Term Performance (a normative view)

February 7, 2015 1 comment

Bebchuk and Fried wrote in 2009 a since then classical article on “Paying for Long-Term Performance”, in which they addressed one of the problems that if not at the roots of the 2008 economic crisis, nevertheless helped increase the damages generated by it, (particularly within the financial sector). (1) We will in this post summarize the Eight Principles they recommend to consider when designing a Long-Term Incentive Plan, and what is more, when the equilibrium between short-term pay and long-term pay is considered.

In 2009 Treasury Secretary Geithner urged corporate boards to “pay top executives in ways that are tightly aligned with the long-term value and soundness of the firm”. In fact, a belief was widely shared, that pay arrangements before the 2008/2009 crisis were flawed as they forced executives to focus in the short-term and to take excessive risk, to the expense of the long-term value of the firm, (that sometimes was a systemic risk entity).

Even if there was agreement on that, how to do it was not a common ground. Bebchuk and Fried tried to define the best way to tie equity-based compensation to long-term performance, (1). Read more…

Long-term Incentive Plans (a positive view)

February 1, 2015 Leave a comment

Long-Term Incentive Plans (LTIP) are largely used by companies in order for executives to pursue long-term objectives (as a balance to the short-term focus imposed by annual bonuses and other short-term payments), to retain executives, and to tie top executives` behavior to shareholder value and strategy.

Since 1973 Frederick W Cook publishes a study of LTIP by US bigger companies. We will follow their 2014 study (1) to describe the structure companies use for their LTIP, the different tools, their relationship with corporate performance and some other topics.

They consider a LTI can be defined as an award included in a plan, not limited by both scope, (very restricted number of beneficiaries) and frequency, (a one-time award for hiring purposes for instance). The grants must reward performance, continued service or both for a period lasting more than a year. Read more…