Update on the merger with Luxottica:
In January 2017, Luxottica signed a merger agreement with the Essilor. The agreement consisted of two main transactions: (i) Delfin's stake (largest shareholder, controlled by Leonardo Del Vecchio) in Luxottica (61.6%) will be transferred to Essilor in exchange for Essilor shares at an exchange ratio of 0.461 Essilor share for 1 Luxottica share; (ii) a subsequent mandatory exchange offer to be launched by Essilor on the remaining Luxottica's outstanding shares. Following the transaction, Delfin will be the largest shareholder of EssilorLuxottica, with at least 31% of the share capital. Each EssilorLuxottica share will cast one vote (there will no longer be double voting rights), but voting rights of any shareholder will be capped at 31%.
As of the time of writing, the transaction has yet to be completed.
Resolutions 12 and 13: ex-post binding “Say-on-Pay” vote
While the transparency of the company is in line with the best practices of the CAC 40, Proxinvest cannot support compensation awarded to the CEO and Deputy CEO for several reasons. First of all, quantum is not acceptable as it exceeds our socially acceptable maximum. Moreover, the post-employment commitments, which in themselves do not conform to our guidelines, would inflate an already very generous remuneration. Lastly, it is not acceptable for Essilor to have retroactively modified the performance conditions of the performance share plan, especially since the new condition (completion of the merger with Luxottica), unlike the initial condition, does not make it possible to measure long term performance.
Resolution 14: ex-ante vote on the Remuneration Policy
Although the base salary and bonus targets planned for 2018 conform to our guidelines, we are concerned by the lack of transparency regarding fixed pay after the completion of the Luxottica merger. Moreover, the maximum potential bonus and the Top Hat benefits were deemed excessive.
Essilor International (Compagnie Generale d'Optique) designs, manufactures and sells ophthalmic lenses, ophthalmic optical instruments and equipment. Co.'s activities are divided into three segments: Lenses and Optical Instruments (Co. designs, manufactures and customizes corrective lenses such as: Varilux (progressive lenses); anti-reflective, smudge-proof and anti-static lenses (Crizal); Nikon lenses, Transitions variable-tint lenses and Kodak lenses under agreements; polarized lenses (Xperio) and fog-proof lenses (Optifog)), Equipment (Co. produces, distributes and sells equipment and consumables used by prescription laboratories) and Readers (Co. designs and sells reading glasses).
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The general evaluation of ESSILORLUXOTTICA SA (FR), a company active in the Medical Equipment industry, has been upgraded by the independent financial analyst theScreener with the addition of a star. Its fundamental valuation now shows 4 out of 4 possible stars while its market behaviour can be considered as moderately risky. theScreener believes that the additional star(s) merits the upgrade of its general evaluation to Slightly Positive. As of the analysis date July 2, 2019, the closing price was EUR 114.15 and its potential was estimated at EUR 119.86.
• Si les ventes online n’ont que faiblement pénétré le secteur optique (~5% du marché mondial) en comparaison de la mode (~25-30%), le parcours d’achat s’est en revanche fortement digitalisé sous l’effet de la technologie et de la part grandissante des nouvelles générations qui importent de nouveaux modes de consommation. Ainsi, près de 60% de la clientèle utilise internet comme première étape dans le parcours d’achat, illustrant l’importance du « ROPO » (« Research Online, Purchase Offline »)
Item 3: Approve the Remuneration Report The structure is weighted more heavily towards short-term performance. One of the performance metrics for the LTI is the payment of sustainable dividends, which is not considered appropriate as executives can potentially influence the payout level. The LTI also includes relative TSR as a performance metric. Nevertheless, the quantum is not excessive and even maximum potential amounts are moderate. On balance, we recommend shareholders vote in favor. Item 4: Approve the Remuneration PolicyThe main concern with the Company's remuneration policy is that pa...
Item 2: Approve the Remuneration ReportThe remuneration structure is unsatisfactory. The main concern at the Company is that the potential maximum incentive pay including the bonus, matching shares on the deferred portion of the bonus and the LTI amounts to 1000% of base salary, which is considered grossly excessive. Actual incentive pay during the year was1.6 times the ECGS limit. Furthermore, variable remuneration is overly reliant on a single performance metric, benchmark profit before tax. A second performance criteria will be used in the coming year. We note that the Company has adjusted ...
Leadership changes Vittorio Colao was succeeded by Nick Read who was appointed Chief Executive Designate on 27 July 2018 and became Chief Executive on 1 October 2018. Margherita Della Valle joined the Board as Chief Financial Officer on 27 July 2018. Item 15: Advisory vote on the Remuneration ReportThe structure is unsatisfactory. The maximum bonus and total incentive pay exceed guidelines. The quantum for the year was excessive. Pay weighted more towards rewarding long-term performance, but there are overlapping performance conditions as free cash flow was used for both the STI and LTI. A b...
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