COVID-19, ESG criteria and Act 5/2021 mark remuneration policy of listed companies

July 19, 2021

For the fourth consecutive year, Willis Towers Watson, Georgeson and Cuatrecasas analyzed the main issues concerning the remuneration of the directors and senior managers of listed companies from the perspective of the issuers, the institutional investors and proxy advisors. The experts explained the main conclusions, including how the 2021 proxy season has been marked by the COVID-19 crisis, the importance of ESG criteria in remuneration policies and the approval of Act 5/2021.

Francisco Pérez-Crespo Payá, partner in the Cuatrecasas Corporate and Commercial Practice, inaugurated the session explaining the purpose of and main developments introduced by Act 5/2021: “Among others, the new regulation redefines the contents of remuneration policies and requires that all remuneration systems for all tasks performed by directors are reflected in the bylaws.”

Claudia Morante, head of Corporate Governance at Georgeson España, highlighted that investors have placed special emphasis on wage moderation and on the discretion of the remuneration committee to grant incentives to executives in the 2021 proxy season: “In this year of the pandemic, the modifications in performance objectives, the metric adjustments and the low level of disclosure in relation to pay for performance did not get a good welcome on the market.”

Cristina Martín, senior director of Talent & Rewards at Willis Towers Watson said that, in recent years, environmental, social and corporate governance (“ESG”) issues have become one of the main focuses of attention for global companies and are a sign of changes to come: “The board’s role and responsibility, directors’ and managers’ remuneration, and the impact on human capital are part of the metamorphosis underway.” 

Juan Guerrero, director of Executive Compensation at Willis Towers Watson, highlighted that the design of incentive systems must mainly respond to the achievement of the organization’s strategic milestones: “In the last year, we have seen more and more companies personalizing the design of their incentive systems, beyond the standard models.”

Lastly, Álvaro Antón, partner in the Cuatrecasas Tax Practice, explained that, despite the corporate and tax lawmaker’s efforts to bring certainty in terms of directors’ remuneration in the reforms of the Spanish Companies Act (“LSC”) and of the Company Tax Act (“LIS”) of 2014, its tax deductibility continues to be a controversial matter: “The tax authorities continue with their restrictive interpretation and the Supreme Court, which has already given judgment on the scope of the reform concerning corporate and commercial matters (LSC), has not yet had the occasion to give judgment regarding tax matters (LIS).”


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