* Holds AGM on Thursday to name new board
* New CEO's pay package has come under fire
* Proxies take aim at first-year guaranteed bonus
* Up to 7.5 mln euros deal among highest for a European bank
MILAN, April 14 (Reuters) - Investors are due to approve
Andrea Orcel's appointment as chief executive of UniCredit
on Thursday, but the issue that scuppered his first
attempt to run a major bank is overshadowing his second: pay.
Orcel, 57, will join UniCredit just over two years after
Spanish bank Santander withdrew an offer to make him
its CEO after a disagreement over his pay package that ignited a
112 million euro ($134 million) legal dispute.
Though only a fraction of the $30 million-plus bonuses Orcel
got as a Merrill Lynch banker earlier in his career,
UniCredit's offer of up to 7.5 million euros ($9 million) a year
puts him ahead of British bank Lloyds' new CEO Charlie
Nunn and of most European peers, analysts said.
UniCredit has said the package does not include any
compensation for the more than 25 millions euros in deferred pay
from former employer UBS Orcel is losing by taking a
But the share bonus of up to 5 million euros, which is twice
the fixed pay, has not been linked to performance or subjected
to claw-back clauses for the first year.
The guaranteed bonus and a generally much higher pay package
than his austere predecessor Jean Pierre Mustier had opted for
have irked some of UniCredit investors and prompted leading
shareholder advisers to call for a "no" vote on the matter.
Institutional Shareholder Services and Glass Lewis both back
Orcel's appointment but they have recommended rejecting
UniCredit's remuneration policy due to the "problematic pay
package of the new CEO."
"The package is out of tune with the current setting, that
calls for sobriety, and the previous CEO's pay," Italian proxy
adviser Frontis Governance founder Sergio Carbonara said.
Frontis also advised shareholders to vote against the pay
policy and Carbonara said he expected it would be rejected.
Speaking on condition of anonymity due to the sensitivity of
the issue, two top 30 UniCredit investors told Reuters their
funds would vote against the remuneration package.
A spokesman for UniCredit said it would be Orcel's decision
what to do if his pay package was not approved.
"They should have judged the market appetite for this type
of a reward better," Filippo Alloatti, senior credit analyst at
Federated Hermes, said.
"It's a little bit of a distraction ... they're inviting
questions they could have easily avoided."
A report by Italian market regulator Consob last week showed
that the share of institutional votes rejecting companies'
remuneration policies has increased in the last few years.
"Investors' dissent on companies' pay policy is on the
rise," said Alessandro Zattoni, an Italian academic who chairs
the International Corporate Governance Society.
Not all UniCredit investors begrudge Orcel his pay. The
historic Fondazione Cariverona banking foundation has said the
"important and brave" choices UniCredit faces to revive its
profits call for the best talents available.
Also Turin-based Fondazione CRT, another UniCredit
shareholder, intends to support the package.
"The 'Cristiano Ronaldo' of finance deserves a champion's
pay," individual shareholder Gianluca Fiorentini wrote in
questions to the bank ahead of the AGM. "Only time will tell if
that's money well spent."
A rejection of Orcel's proposed pay package would leave in
place the current policy - meaning a fixed pay of 2.1 million
euros and twice as much in variable remuneration.
UniCredit's former CEO Mustier, who left in February after
falling out with the board over strategy, never actually earned
The French banker, who arrived in 2016 to steer UniCredit
through a restructuring, cut his fixed pay by 40%, waived his
yearly bonuses and pledged to leave without a severance check
when the time came - as he outlined in slides during his first
UniCredit is now proposing doubling the cap on the severance
payment to 15 million euros from 7.2 million under the new
policy designed to attract global talent.
"They would say that in order to get a very skilful
individual they need to put something on the table, but I could
retort also that from Orcel's point of view this is a second
chance for him in his career," Hermes' Alloatti said.
Orcel, who once declared in an interview he dreamt of
running a bank one day, has been out of a job for the past two
years after decades at the forefront of European banking, lastly
as head of UBS' investment banking arm.
"He was never CEO of a listed bank ... it is a chance for
him," Alloatti said. ($1 = 0.8385 euros)
(Reporting by Valentina Za, Stephen Jewkes, Maria Pia Quaglia
in Milan; Simon Jessop in London. Editing by Jane Merriman)