It's bonus as usual for senior execs

In September 2009, almost two years after the current financial crisis kicked in, and taxpayers in the leading western economies were bailing out the banks while wondering if they would hold on to their jobs, seven EU finance ministers, among them Spain's Elena Salgado, wrote an open letter ahead of the G20 meeting in Pittsburgh that month saying they would press for clearly defined restrictions on bankers' pay.

"Public opinion in our countries finds it hard to understand how so few people are able to make such demands. The amounts of some bonuses are questionable and not just from a moral perspective," the letter said. It concluded: "It's important that, as politicians, we give a clear message that the old bonus culture must come to an end."

Eighteen months later, an investigation carried out by EL PAÍS suggests that little has changed. The annual reports of Spain's leading companies for 2010 indicate while one in four of the workforce is out of a job, and a quarter of households have no income coming in, their senior executives have, by and large, managed to avoid the impact of the worst economic crisis to hit in half a century.

It isn't easy making sense of the annual reports for 2010. Looking at the bottom line, it appears that board members' wages have fallen and senior management's have risen. But in both cases there are payments that make comparisons difficult.

Remuneration to board members of 121 companies in Spain amounted to 398.5 million euros in 2010 - 11 percent less than in 2009. That said, the drop is due in large part to a series of one-off payments and incentives that were not repeated last year. If those numbers are taken into account, then the drop really amounts to less than 1 percent compared to 2009. What's more, viewed in the longer term, it can be seen that over the last five years, board member payouts for the country's top 35 companies have risen by 40 percent.

The conclusion is that these companies grew rapidly during the boom years and that they have managed to hold on to their earnings even through the worst of the crisis. It is also true that most of Spain's largest companies have been able to avoid the crisis by focusing on overseas markets, particularly in Latin America.

In any event, the drop in bonus payments last year was the largest registered since the National Stock Exchange Commission introduced measures requiring companies to provide corporate governance reports.

Spain has been slow to embrace Corporate Governance initiatives. Proposals were first made in 1996. In 1998, the so-called Olivencia Report came up with proposals to foster transparency and security in markets and listed companies. In 2003, the Aldama Report essentially endorsed the philosophy of the rule of law, self-regulation of markets, and maximum transparency.

The 2006 Unified Code on Good Corporate Governance establishes recommendations on size and structure of the board of directors; the publication of board remuneration in annual reports; and the publication of the companies' audited financial statements, in their public offering prospectuses when they issue securities.

The overall drop in payouts to senior executives is largely due to exceptional factors, and only 62 of the 121 leading companies have cut bonus payments.

The figures are further distorted by the huge payments made by Amadeus, which went public last year. It paid out 516 million euros in 2010 to its non-board member executives. The fall in bonus payments for 2010 is due in large part to delays in assessing profits from the year before, given that bonuses tend to be paid out only when the accounting process has been completed. Many companies paid out smaller bonuses in 2010, but overall, bonuses tend more to increase during boom years than to drop when times are lean.

Furthermore, the term "senior executives" means different things to different companies: Telefónica counts just six people out of its management team of 1,900, while a much smaller company, Vidrala, for example, counts 36 people among its senior management. The company with the largest number of executives eligible for bonus payments is the construction firm ACS, with 65.

The two biggest factors in establishing the amount of money to be paid to board members are the size of the company and the number of executive board members. In absolute terms, the best-paid board members in 2010 were from Banco Santander (34.1 million euros), Telefónica (27.6 millioneuros), Mapfre (13.4 millioneuros), BBVA (13 million euros), ACS (12.2 millioneuros), Iberdrola (11 millioneuros), and Repsol (11 millioneuros).

On average, Telefónica's senior board members were each paid 541,000euros on average, followed by 462 millioneuros at Iberdrola, and 456 millioneuros at BBVA.

So far, Telefónica has yet to publish how much it has paid its CEO, César Alierta, generally agreed to be the country's highest-paid executive. The Stock Exchange Commission has yet to enforce the publication of information required by the government's sustainable economy legislation, introduced in March, and which in theory obliges companies to publish the salaries of its board members and to submit these payments to a shareholders' vote.

Spain's other top earners are José Antonio Tazón, the CEO of Amadeus, who was paid more than 10 millioneuros when the travel distribution system company joined the stock exchange. Coming in a close second is Santander CEO Alfredo Sanz, whose bonus for last year was 9.2 millioneuros.