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ACS, Actividades Construcción y Servicios S.A. - AGM 09 May 2019

In items 5.1 - 5.12, twelve of the board's eighteen members are standing for re-election. We have recommended shareholders vote against all but three of the directors due to the lack of independence on the Board. We are further concerned with the large size of the board, lack of gender diversity and the failure to propose all directors for annual re-election.

The separation of powers between the Executive Chairman and the CEO continues to be confusing with some of the company's materials referring to the Chairman as an "Executive Chairman" and others referring to a "Chairman-CEO". In particular, the Company's document on the directors proposed for re-election refers to Mr. Florentino Perez as the Company's joint Chairman and CEO. ECGS policy is not to recommend support for a joint Chairman and CEO or an Executive Chairman unless temporary and adequately justified. However, as the Spanish corporate governance code allows for this, in Spain, we can recommend support for an Executive Chairman if power is shared with another executive, there is a Lead Independent Director and there is a majority of independent directors. ACS does not meet these conditions.

 In item 6, shareholders have a non-binding vote on the remuneration report. The level of disclosure is below Spanish market practice and makes it impossible to assess the link between pay and performance. Pay at the Company is excessive. Excessive salaries are paid to the Executive Chairman, the CEO and the Company Secretary. Although the CEO's total remuneration fell by 48% in 2018, this is primarily due to the high remuneration paid in 2017 in which he received a huge incentive of EUR 15.2 million from Hochtief. (Hochtief, a company subsidiary, pays 70% of the CEO's remuneration and ACS pays the other 30%.) The maximum bonus of 200% of base salary exceeds guidelines and the LTIP is uncapped. Awards of 500,000 shares were made under the new LTIP to the Executive Chairman and the CEO. Finally, pension contributions exceeded base salary. Therefore, we recommend shareholders oppose.

Actividades de Construccion y Servicios S.A.

ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.


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