-- Vodafone CEO earns total compensation of close to GBP14M In 2012
-- Bulk of compensation is share options vesting in June, dating over three year period
-- Base salary up marginally, bonus down 21%
-- Vodafone taking action to reduce exposure in troubled southern Europe
By Jessica Hodgson and Marietta Cauchi
Vittorio Colao, chief executive of Vodafone Group PLC, (>> Vodafone Group plc) will earn almost GBP14 million during 2012 in salary, bonus, benefits and share options, the company's annual report Friday shows, although the company's net profit fell by 13% in the fiscal year to March 31 2012.
The pay package -- one of the largest among U.K. chief executives this year -- is unlikely to provoke the levels of shareholder ire that have led some FTSE chief executives to quit their jobs amid pay rows. Vodafone has broadly outperformed its peers in terms of its shareholder return during the period of Colao's stewardship and the company's share price hasn't plunged this year like some other U.K. stocks. It may nevertheless be scrutinized by investors in no mood for excessive payouts.
The bulk of Colao's compensation is accounted for by share options worth almost GBP11 million, which vest in June of this year and which cover a three-year period starting from 2009. Colao has, however, committed to hold on to all of the vesting shares for an additional two years. Colao will also receive a salary of GBP1.09 million, up 5% from GBP1.04 million in 2011, although his bonus has fallen by 21% to GBP1.03 million
The world's biggest mobile operator by revenue in May reported a 13% fall in annual net profit, dragged down by sluggish spending in southern Europe's troubled economies.
Vodafone said in May that its net profit for 2012 fell to GBP6.96 billion for the year ended March 31 from GBP7.97 billion a year earlier.
Vodafone has awarded Colao the maximum share-based payout because the company achieved the metrics required to hit the payout, a spokesman said. These include free cashflow generation and total shareholder return compared with peer group companies.
Vodafone, in its annual report, points out that it has paid out over GBP19 billion in dividend payments in the period since 2008, and generated free cashflow of nearly GBP21 billion, in excess of its own free cashflow targets.
The past few months have seen a spate of disputes between companies and institutional investors in the U.K., which have led to a number of high profile resignations and some changes to corporate remuneration policies.
Nearly a third of shareholders in Barclays PLC (>> Barclays PLC) voted to oppose the company's pay package at the company's annual general meeting in April. Bob Diamond, chief executive, was paid GBP6.3 million in salary and bonus for 2011, in addition to a GBP5.7 million tax payment on his behalf by the company.
Aviva PLC (AV.LN) chief Andrew Moss last month was forced to quit immediately after a shareholder revolt following a year of underperformance. Moss' departure followed that of Trinity Mirror PLC's (>> Trinity Mirror plc) chief executive, Sly Bailey, and David Brennan at U.K. drug giant AstraZeneca PLC (>> AstraZeneca plc), all three quitting as investor anger centers on executive pay perceived as excessive in the light of company underperformance.
Vodafone gets a large chunk of its profits from countries now considered at risk because of the ongoing eurozone crisis. These include its markets in Italy which represents 17% of company earnings before interest, tax, depreciation and amortization; Spain which accounts for 8%; Portugal 3%; and Ireland and Greece which contribute a combined 3%.
In addition to the GBP4 billion aggregate impairment charge for these countries identified at year end, Vodafone said it has taken action to reduce its exposure in these countries. For example, it has reduced counterparty limits with certain financial institutions and converted a significant proportion of euro denominated holdings and deposits into sterling and U.S. dollar investments; made some changes to its bulk-buying contracts across the group; and ensured that it can switch to a more cash-based model in the event banking systems are frozen with adequate access to alternative currencies.
The company hasn't made any financial provisions for future liabilities arising from the collapse of the eurozone or the exit of any country from the eurozone.
-By Jessica Hodgson and Marietta Cauchi, Dow Jones Newswires; +44207 8429373; [email protected]