Naturgy Energy Group - March, 05th 2019
In item 7, the Board proposes to appoint Mr. Scott Stanley as non-executive Director representing the significant shareholder GIP. Although GIP is not overrepresented (2 representatives, or 17% of Directors, with 20% of the share capital), serious concerns may arise over the lack of independent representation on the Board (42%). Therefore, we recommend opposition.
In item 10, the Board proposes several amendments to the remuneration policy (binding vote), including a new incentive and the introduction of a claw-back clause. Although we welcome the introduction of the incentive plan, we note that the overall variable remuneration still depends more on annual than long-term results (the annual bonus is capped at 150% and the LTI at 125% of the CEO's base salary on an annual average basis). We also have concerns over the Chairman-CEO's base salary (€ 2'030'000), which is more than double the median at European Utilities companies (€ 973'817) and large Spanish non-financial companies (€ 1'000'000), and a time limit of 18 months for a claw-back clause is too short. Therefore, we recommend opposition.
In item 11, the Board proposes to approve the new 2018-2022 incentive plan (binding vote). We regret that the incentive depends on only one performance condition (the TSR), but in our opinion the introduction of a 5-year equity-based incentive plan is effectively aimed at aligning the interests of executives and shareholders in the long term. Also considering that the cost of the incentive will be at least partially covered by the management of the treasury shares (fully covered if Naturgy share's price will be higher than € 23.15 on the vesting date), we recommend approval.
In item 13, shareholders are called to an advisory vote on the Annual Remuneration Report. We strongly regret that the Board has not provided clear justifications for a 38% increase in the non-executives' fixed fee, and the Company has not disclosed the performance conditions used to calculate the 2018 bonus. Also taking into account our concerns on the overall remuneration policy, we recommend opposition.
Gas Natural SDG is a gas company based in Spain. Co. and its subsidiaries are primarily engaged in the supply, transportation, distribution and commercialization of piped natural gas, as well as the activities involving exploration and developing, supply, regasification, liquefaction and storage of natural gas, and the generation and commercialization of electricity. Co. operates mainly in Spain and also outside of Spain, especially in Latin America, Puerto Rico, Italy, France and Africa (through Maghreb-Europe gas pipeline and integrated LNG projects in Algeria).
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