2022-03-12 20:31:02
Electricity prices they skyrocketed last year, as anyone who pays a monthly electricity bill knows. This resulted in a sharp increase in the profits of these companies, which tripled, as the ARA explained this week. What is not so well known is that during that financial year six managers, the main executives of the large Spanish energy companies, received more than 27 million euros. In other words, the leaders of these companies were paid 5.2% more while, on average, the salaries of their workers increased by less than a third, 1.5%.
The big winner was José Ignacio Sánchez Galán, president and CEO of Iberdrola, who alone earned almost as much as the other five top executives combined. The controversial Galán won 13.2 million euros, 8% more, although since last June is accused of different crimes linked to the hiring of commissioner José Manuel Villarejo to attack rivals such as Florentino Pérez or Manuel Pizarro, among others. In addition, the average salary of Iberdrola workers fell by 1.3% last year.
As the company explained, much of Galán’s salary increase was explained by a multi-year variable that rewards the increase in shares on the stock market. But the truth is that Iberdrola titles fell by 11% during 2021.
The salaries of the first executives of the Spanish electricity companies
Data from 2021 and variations compared to 2020
Jose Ignacio
Sanchez Galan
P+CEO
IBERDROLA
Francisco
Reynés
P+CEO
NATURGY
jose damian
bogas
CEO
ENDESA
Antoni
llardén
P
ENAGAS
Roberto
garcia merino
CEO
ELECTRIC NETWORK
variation
of the salary of
employees
average salary
of the company
Jose Ignacio
Sanchez Galan
P+CEO
IBERDROLA
Francisco
Reynés
P+CEO
NATURGY
jose damian
bogas
CEO
ENDESA
Antoni
llardén
P
ENAGAS
Roberto
garcia merino
CEO
ELECTRIC NETWORK
Variation in employee salary
Average company salary
Jose Ignacio
Sanchez Galan
P+CEO
IBERDROLA
Francisco
Reynés
P+CEO
NATURGY
jose damian
bogas
CEO
ENDESA
Antoni
llardén
P
ENAGAS
Roberto
garcia merino
CEO
ELECTRIC NETWORK
Variation in employee salary
Average company salary
The second highest-paid executive was Francisco Reynés, president and CEO of Naturgy, who took home 5 million euros, a 9% increase. In third place was Josu Jon Imaz, CEO of Repsol, with a salary of 4.2 million (15% more), followed by José Bogas, CEO of Endesa (2.2 million, -24%); Antoni Llardén, president of Enagas (2.1 million, -2%) and Roberto García Merino, CEO of Red Eléctrica (0.9 million, +6%).
One of the things that draws the most attention when collecting the data that the same companies are obliged to communicate to the CNMV, the stock market’s supervisory body, is the comparison between the salaries of most of these managers and what earn on average the employees of their companies.
Galán, once again, breaks all records, with a salary that is 171 times the average salary of Iberdrola workers: if the president received more than 13 million, the staff received 77,000 euros.
The most surprising thing about Galán is that this multiplier has only grown: in 2017 he was paid 99 times the average salary of his workers and this magnitude has been growing year after year without exception.
In contrast, all other managers have kept this ratio fairly stable. Reynés earns 86 times more than his workers (in his first year in office the figure was 78 times) and Imaz multiplies the average salary by 74 (almost identical to five years ago), for example.
The manager who has the lowest remuneration compared to his staff is the head of Red Eléctrica, whose salary is 12 times higher.
How much do managers get paid compared to their workers?
When the salary of the first manager multiplies the average salary of the staff
José Damián Bogas (Endesa)
Jose Ignacio Sanchez Galan (Iberdrola)
Antoni Llardén (Enagás)
Francisco Reynés (Naturgy)
Roberto García Merino (Electrical Network)
Jose Ignacio Sanchez Galan (Iberdrola)
Francisco Reynés (Naturgy)
José Damián Bogas (Endesa)
Antoni Llardén (Enagás)
Roberto García Merino (Electrical Network)
Jose Ignacio Sanchez Galan (Iberdrola)
Francisco Reynés (Naturgy)
José Damián Bogas (Endesa)
Antoni Llardén (Enagás)
Roberto García Merino (Electrical Network)
This data reopens the eternal debate about how much managers should be paid. What is a fair remuneration for someone who has the responsibility of running an Ibex-35 company?
Although there are proposals such as that of Christian Felber – promoter of the economy of the common good – who suggests that the salary should not exceed 20 times the minimum salary of the organization, the truth is that there is no formula mathematics It depends on the industry, the company or even the country where that company operates.
“Coffee for everyone doesn’t work,” explains Ernesto Poveda, president of Icsa, a human resources company that, among other activities, is dedicated to setting remuneration policies. Even so, “charging 171 times the average salary of your workers is neither reasonable nor justifiable and can only be maintained if the company operates in an oligopolistic sector”, he adds. Poveda gives an example: with these figures “it is very difficult when you negotiate with the unions to deny them the right to raise their salary by 5%”.
The role of the consultants
Ruth Aguilera, professor of general management and strategy at Esade, warns of the role played by another type of consultancy specialized in the remuneration of these large companies, such as Aon Hewitt, Mercer or Meridian. “The compensation of these managers is decided by the remuneration committee [que tenen totes les cotitzades], but what these committees do is to hire a consultant who analyzes the complexity of the industry, the risks and the challenges of the manager”, says Aguilera. Now, as the professor explains, the fees of these consultants are set with a percentage of the remuneration that that manager will receive, which creates a perverse incentive. “The CEO is happier if they give him a good salary and so he hires them again, it’s a bit inbred”, he concludes.
Aguilera believes that the energy sector has many difficulties ahead, such as the green transition, and that this could justify a higher remuneration. At the same time, however, he argues that this not only affects the main manager but also the rest of the staff, who must specialize more and, therefore, must also be paid more. “The multiplier between the salary of the management and the staff should be stable or go down, but not up”, he concludes.
Jose Ignacio
Sanchez Galan
P+CEO
IBERDROLA
Francisco
Reynés
P+CEO
NATURGY
jose damian
bogas
CEO
ENDESA
Antoni
llardén
P
ENAGAS
Roberto
garcia merino
CEO
ELECTRIC NETWORK
Variation of
results of
the company
Consolidated net result
Jose Ignacio Sanchez Galan (Iberdrola)
Francisco Reynés (Naturgy)
José Damián Bogas (Endesa)
Antoni Llardén (Enagás)
Roberto García Merino (Electrical Network)
Variation in results
of the company
Consolidated net result
Jose Ignacio Sanchez Galan (Iberdrola)
Francisco Reynés (Naturgy)
José Damián Bogas (Endesa)
Antoni Llardén (Enagás)
Roberto García Merino (Electrical Network)
Variation in results
of the company
Consolidated net result
A final factor that must be taken into account is the increasingly common presence of the same shareholders in this type of company. There are large investment companies that are shareholders of the major Spanish electricity companies: BlackRock, for example, is one of the main shareholders of Iberdrola, Repsol and Enagas. And Norges Bank (which manages Norway’s sovereign wealth fund, the largest in the world) is a prominent investor in Iberdrola and Repsol.
The danger of sharing shareholders
This coincidence also generates perverse incentives, according to an article written in 2016 by two professors at Iese, Miguel Antón and Mireia Giné, the latter director of Banco Sabadell. In his opinion, the inflation of super salaries is related to the growing presence of these “common investors”, as they call them. Because? Because if they set high salaries for managers, and especially if these salaries are not linked to the evolution of the company’s results, they manage to lower the demand that these managers have to compete with their rivals. And, consequently, according to these professors, the investors get that none of their investments cannibalize the other companies in which they have shares.
The article cites data from the United States in which three large investors such as BlackRock, Vanguard and Fidelity vote in favor of remuneration 96% of the time, even if it is not linked to the results of the company. The prediction of these experts is that, as the presence of “common investors” becomes more and more common, the problem will only increase.
Perhaps we will be able to check it this same 2022: we are facing a record price of electricity and gasoline. What will happen to managers’ salaries? The answer, a year from now.
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