Report
Expert Corporate Governance Service (ECGS)
EUR 1017.86 Purchase single report

Proxy Report - 05/04/2018

In item 6, shareholders are called to an advisory vote on the remuneration policy for executive members. We have serious concerns over the possibility to award discretionary bonuses, also considering that a significant component of the variable remuneration (20% of the bonus and 35% of the long-term incentive) is based on a qualitative assessment of the Board. Furthermore, we note that 97% of the long-term incentive is based on the same performance metrics used to calculate the annual bonus (TSR, EPS, debt-to-EBITDA and OCF), so that executives are paid twice for achieving the same target. Hence, we recommend opposition.

In item 9.1, shareholders are called to appoint the members of the Supervisory Board, through a grouped election. A group of significant shareholders jointly holding 39.4% of shares, submitted a slate of 21 nominees. The slate includes 11 independent members (52%), which is in line with the ECGS' guidelines. However, concerns may arise over the high number of Board members that are strongly connected to the Portuguese State, as former members of the Government or the Parliament (7 out of 11 independent Directors). The Portuguese Government was the controlling shareholder of EDP until 2011, and of course it has a significant influence on the Company's operations. Since 2017, EDP and its CEO Mr. António Luís Guerra Nunes Mexia have been under investigation for alleged corruption related to very high compensation paid by the State to EDP for giving up some long-term power-purchase contracts in the 2004-2014 period. We also find as excessive the number of members of the Supervisory Board (21), and we strongly regret that the significant shareholders sitting on the Board have not disclosed the identity of their representatives on the Board after the AGM. Therefore, the actual composition of the Board after the Meeting is not known. Therefore, we recommend opposition.

Due to our concerns over the investigations involving the CEO, and in general the relationships between EDP and Portuguese political institutions, we also recommend that shareholders oppose the appointment of the Executive Board (item 9.2).

Underlying
EDP-Energias de Portugal S.A.

EDP Energias de Portugal is a utility company engaged as a generator, distributor and supplier of electricity in Portugal, and as an electricity generation company and a gas distributor in the Iberian Peninsula. In addition, Co. is a wind power operator with windfarms for energy generation in the Iberian Peninsula, the U.S., Canada, Brazil, France, Belgium, Italy, Poland and Romania and is engaged in developing wind projects in the U.K. Co. is also engaged in generating solar photovoltaic energy in Portugal, Romania and the U.S, and in Brazil it is engaged as an operator in electricity generation. As of Dec 31 2015, Co. had 9.7 million electricity customers and 1.4 million gas customers.

Provider
Proxinvest
Proxinvest

Founded in 1995, Proxinvest is an independent proxy firm supporting the engagement and proxy analysis processes of investors. Proxinvest mission is to analyse corporate governance practices and resolutions proposed at general meetings of listed firms.

Proxinvest main services are :

  • ​Proxy reports
  • Definition and monitoring of client customized voting guidelines
  • Corporate Governance Data and Rating
  • Thematic research
  • Engagement support

Proxinvest has been a pioneer and champion of good corporate governance and has grown into a recognised expert in the field.

Proxinvest is independently-owned and only works for investors : Proxinvest does not provide consulting services to the companies it covers, mitigating related risks to its clients and ensuring the independence of our analysis. As a result Proxinvest is able to take a robust, independent, engaged and unconflicted view of the companies in which our clients invest.

As Managing Partner of Expert Corprate Governance Service Ltd (ECGS), Proxinvest has built a large network of corporate governance experts to support clients in corporate governance analysis worldwide. 

Analysts
Expert Corporate Governance Service (ECGS)

Other Reports on these Companies
Other Reports from Proxinvest
Other Reports from these Analysts

ResearchPool Subscriptions

Get the most out of your insights

Get in touch