(Bloomberg) -- Telecom Italia SpA’s Chief Executive Officer Flavio Cattaneo will receive a bonus of as much as 40 million euros ($45 million) if the media industry veteran succeeds in delivering an urgently needed turnaround at Italy’s biggest phone company.
Shareholders approved the special compensation plan for Cattaneo, 52, on Wednesday at a meeting in Rozzano, near Milan.
The payout will be made in 80 percent in new shares and 20 percent in cash if the company delivers “overperformance” against the business plan over four years as measured by metrics including earnings and a reduction in operating expenses, according to company documents.
Cattaneo was named two months ago after his predecessor, Marco Patuano, clashed with the company’s largest shareholder,
Vivendi SA, the French company controlled by billionaire Chairman Vincent Bollore. Since then, Cattaneo has almost tripled targets for reducing expenses to 1.6 billion euros by 2018 as he aims to improve profitability at the former monopoly.
Internal auditors last month opposed the special bonus for Cattaneo, saying it’s based on a business plan set by his predecessor. Asati, a group representing small investors, also criticized the award, while Italy’s market regulator Consob asked Telecom Italia for clarifications about components that weren’t in line with the company’s remuneration policy approved in 2015. "Just as the need for a turnaround is exceptional, the
special award is equally exceptional," Telecom Italia said in a written answer to Consob.
Italian executives aren’t typically compensated as generously as Cattaneo would be under the plan. His bonus would put him in the same league as Sergio Marchionne, the CEO of Fiat Chrysler Automobiles NV, who received a special cash payment of $35 million last year as compensation for the Fiat-Chrysler
merger. Marchionne is also entitled to a $12 million payout when he retires.
While the company is grappling with shrinking phone bills in a home market dogged by competition, Telecom Italia is facing its toughest battle in Brazil. Its unit there, Tim Participacoes SA, competes with Telefonica SA’s Vivo, the country’s biggest mobile carrier, amid Brazil’s deepest recession in at least a century. At home, the former monopoly is being challenged in fiber broadband networks by Italy’s largest utility Enel SpA, which has the support of Prime Minister Matteo Renzi.
The special bonus is just one component of Cattaneo’s total compensation. He received about 2.5 million euros when he took the helm of the company in March. His annual salary is 1.4 million euros with an additional target-based bonus of 50 percent to 150 percent of that salary. Shareholders on Wednesday also approved about 15 million euros in possible special compensation for other members of Telecom Italia’s management.
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