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Iberdrola`s Remuneration Policy

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.


The company makes a difference between:


  1. Executive Directors: compensation for them is thought to attract talent, while complying with best practices in the area; it is designed to reward both individual performance and company targets` achievement; variable pay tries to reward measurable performance and other non financial targets; long-term incentives are designed for retention and sustainability; some clawback measures are included.
  2. Non-Executive Directors: dedication and responsibility, and peer comparisons are the main criteria when fixing their rewards.


Global limit imposed on board compensation


Compensation for all directors, and for all concepts, (excluding equity and stock option grants and stock price appreciation related payments) are capped at a maximum value, connected with annual profit once shareholders have been assured a certain remuneration. Equity and stock option grants and stock price appreciation related payments, if any, need to be specifically approved by the Shareholders` Meeting.


Remuneration for NEDs.


The structure includes:


  1. A fixed amount for being director, and member or Chairman of any commission.
  2. Some amounts for every meeting to which they assist.
  3. Customary insurance costs.
  4. A non compete clause for a two-year maximum period.


Remuneration for Executive Directors.


  1. A fixed amount that would not surpass 50% of the maximum theoretical annual amount to be received.
  2. Variable pay:
    1. Short-term pay: connected to measurable targets, and also to Corporate Governance and Social Corporate Responsibility objectives.
    2. Medium and long-term pay: aimed at talent attraction, motivation and retention and also to long-term value creation. Measurement terms is three years, (not keeping the higher five-year standard that we referred to in our previous posts (2). Pay will consist of equity, stock options or Stock Appreciation rights, which could be subject to certain time holding requirements, and could also be called back in case of account reformulation, for instance. The report also includes a reference to the need that Medium and Long-term pay is to be released for performance and not for global an overall capital market evolution.
  3.  Termination payments: although some contracts still keep three-year salary payments, new contracts limit these payments to two yearly amounts, (of course in case it is a Not-for-Cause termination).


Concrete details: Effective Compensation


Only the Executive Directors receive variable pay, that is capped (for Chairman and Ceo jointly) ar € 3.25 million.


As for the annual pay, it`s linked to several metrics:


  • Financial: net profit target and having reached a certain amount of divided.
  • Operational: quality of service and labor environment.
  • Social Corporate Responsibility, with three targets, one refered to several international SCR indexes, the other two quite simple bureaucratic.


The long-term incentive plan consists of a 350 people plan, where certain metrics, (Net Profit, stock price evolution and financial strength) will be evaluated in the period 2014-2016. Up to a maximum 0.3% of equity will eventually be granted in the period 2017/2019.


Risks considerations: there is a malus clause that forces the board to evaluate again the long-term incentive metrics in each of the three deferral periods in 2017/2019, so that equity awards could be reduced or eliminated.




  1. https://joaquinbarquero.wordpress.com/2015/02/07/bbvas-remuneration-policy-2015/
  2. https://joaquinbarquero.wordpress.com/2014/11/29/performance-metrics-and-long-term-alignment/, https://joaquinbarquero.wordpress.com/2015/01/17/performance-metrics-and-long-term-alignment-ii/, and https://joaquinbarquero.wordpress.com/2015/01/24/performance-metrics-and-long-term-alignment-iii/

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