Executive Remuneration at Listed Companies

Sandro Barbato

How do shareholders influence how much an executive gets paid? Join Sandro Barbato as he explores how compensation packages change when a company is listed on a stock exchange.

Corporate Governance

How do shareholders influence how much an executive gets paid? Join Sandro Barbato as he explores how compensation packages change when a company is listed on a stock exchange.

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Executive Remuneration at Listed Companies

13 mins 25 secs

Key learning objectives:

Understand how executive remuneration principles differ for listed companies and the role of shareholders in deciding compensation
Identify how corporate governance impacts compensation policies at listed companies
Describe how ESG and ESG-focused targets are becoming part of executive remuneration packages

Overview:

One of the key components that must be considered when talking about compensation at listed companies is corporate governance. Along with the shareholders, corporate governance plays an important role in deciding how executives are compensated. ESG-related targets, like employee satisfaction and improved ESG-ratings, are also increasingly becoming part of the remuneration conversation.

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Summary

How does corporate governance influence remuneration systems?

Corporate governance is a system of rules, practices, and measures by which a company should be managed and controlled. When it comes to remuneration, corporate governance determines things like the minimum number of independent directors, the establishment of an audit committee or a remuneration committee. It is the responsibility of the remuneration committee to set up executive remuneration systems.

How do shareholders impact the compensation decisions at listed companies?

Shareholders of public companies have a unique right, the voting right. Shareholders, especially institutional investors, elect the board, decide over capital increases and make decisions on executive compensation. Institutional investors can represent the majority of the share capital at an Annual General Meeting, so it is important that everything presented fits with their expectations (including the compensation package) or risk not receiving the necessary support.

What are the core interests of the shareholders when it comes to remuneration?

When assessing remuneration, shareholders want to ensure compensation is appropriate for the company, its market and is aligned with the interests of the shareholders. Most institutional shareholders want an alignment with their own long-term investment horizons.

Shareholders also expect an appropriate set up of a remuneration committee and full disclosure of all remuneration-related elements.

How has ESG played a larger role in executive remuneration and what are some popular ESG-related targets?

Environmental, Social and (corporate) Governance (ESG) represents the latest big development in executive remuneration. Targets related to ESG have increasingly become part of remuneration discussions. Some of the most popular ESG-related targets being the increase of employee satisfaction, the improvement of an ESG-rating, or setting the route to achieving net zero. Executives who hit these targets could receive larger bonuses or other rewards.

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Sandro Barbato

Sandro Barbato joined Alliance Advisors in early 2023 having previously worked for IHSMarkit (now part of S&P Global) for over two years and prior to that Morrow Sodali for over 5 years. Having worked on nearly 100 projects globally, Sandro, who is fluent in German, Italian and English, is experienced in assisting and advising clients on Corporate Governance & ESG, Proxy Solicitation, Roadshows, M&As Transactions and Activism. Sandro holds a German degree in business law (Diplom-Wirtschaftsjurist), is a member of the UK IR Society (MIRSoc), the Italian IR Society AIR, and of the AIAF (Italian Society of Financial Analysts) which is the Italian member within the EFFAS (European Federation of Financial Analysts). He is certified as a Financial Modelling & Valuation Analyst (FMVA) and an ESG Specialist,both by the Corporate Finance Institute (CFI). In addition, he is a certified ESG Analyst (CESGA) by the EFFAS Societies and certified in Investor Relations (ICIR) by the UK IR Society

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