Stellantis faces pushback over CEO's pay package

Stellantis Faces Shareholder Discontent Over CEO Compensation Package

A significant investor in automotive giant Stellantis, the parent company of Peugeot, is set to vote against the proposed €23.1 million pay deal for Chief Executive Officer Carlos Tavares, signaling growing shareholder scrutiny over executive remuneration. The move highlights concerns about the alignment of CEO compensation with company performance and shareholder value.

Investor Raises Concerns Regarding CEO Pay

Allianz Global Investors, a major investment firm, has voiced its opposition to Tavares’ substantial remuneration package, deeming it “excessively generous.” This assessment is based on what Allianz GI perceives as Stellantis’ “underwhelming operational performance” and unresolved questions surrounding Tavares’ unexpected departure the previous December. The investor’s dissent underscores a broader debate on executive pay levels and accountability within large corporations.

The controversial payout encompasses a €2 million base salary, a €500,000 “post-employment benefit expense,” and a significant €20 million allocated through a long-term incentive (LTI) plan. The structure of this package has drawn criticism amidst concerns of performance misalignment.

Allianz GI emphasized that Stellantis’ previously announced profit warning in September should have had a more pronounced impact on variable compensation. They noted that this impact appears to be insufficiently reflected in the CEO’s bonus structure, raising further questions about the pay determination process.

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The investment management firm also expressed “ongoing apprehensions” concerning the actions and oversight of Stellantis’ remuneration committee, suggesting a lack of confidence in the body responsible for setting executive pay.

Objections to Remuneration Committee Members

Adding to their protest, and given that Stellantis’ chairman is not seeking re-election, Allianz GI intends to vote against two non-executive directors who are members of the remuneration committee. This action directly targets those responsible for approving the CEO’s contentious pay package, demonstrating a firm stance on corporate governance.

Allianz Global Investors has consistently challenged Tavares’ compensation arrangements since he assumed the CEO role at the inception of the automotive conglomerate.

Stellantis Formation and Market Challenges

Stellantis was established in 2021 through the merger of PSA Group and Fiat Chrysler Automobiles, creating the world’s fourth-largest automaker. This merger aimed to create synergies and bolster competitiveness in a rapidly evolving automotive landscape.

Matt Christensen, Global Head of Sustainable and Impact Investing at Allianz, stated that their current position reflects “our dedication to ensuring executive compensation is intrinsically linked to sustained company success and the interests of all stakeholders.” He further articulated, “We maintain that the present compensation arrangement fails to adequately address the issues we have raised during our engagement, and we strongly encourage the remuneration committee to prioritize shareholder interests while also considering sustainability factors.”

Stock Performance and Financial Downturn

Stellantis’ stock value has significantly decreased by approximately two-thirds over the preceding year. This downturn is attributed to a confluence of factors, including production delays, a decline in European sales partly due to escalating interest rates, and heightened competition emanating from Chinese electric vehicle manufacturers.

The automaker’s full-year financial results revealed a 17 percent decrease in net revenue, amounting to €156.9 billion. Simultaneously, net profits experienced a substantial 70 percent drop to €5.5 billion, underscoring the financial pressures facing the company.

In the past week alone, the company’s shares have further diminished by 18 percent amidst the repercussions of recently implemented tariffs by President Donald Trump. These tariffs include a 25 percent levy on automobile imports into the United States, impacting global automotive trade.

Impact of Tariffs and Production Adjustments

Since President Trump’s “Liberation Day” address on April 3rd, Stellantis has implemented production halts at assembly plants located in Canada, Mexico, and Michigan. Furthermore, the company has temporarily furloughed 900 employees across five facilities in the United States as it adjusts to the changing trade environment.

Antonio Filosa, Stellantis’ Chief Operating Officer for the Americas, communicated to employees via email, stating, “These actions are not undertaken lightly, but are essential in response to the prevailing market dynamics.” He acknowledged the uncertainty created by the current circumstances and affirmed, “Be assured that we are actively engaged with all key stakeholders, including government leaders, unions, suppliers, and dealerships in the US, Canada, and Mexico, as we navigate and adapt to these evolving changes.”