Proxy advisers urge shareholders to reject Telecom Italia CEO pay

MILAN (Reuters) - The world's top two proxy advisers have told Telecom Italia (TLIT.MI) shareholders to reject new Chief Executive Flavio Cattaneo's pay package amid growing investor criticism of excessive wages for top managers.

Cattaneo is set to be paid 1.4 million euros (£1 million) annually, in line with his predecessor. But a bonus worth between 50 to 150 per cent of his salary could be added if annual targets are reached, according to a corporate governance report by Telecom Italia.

He could also receive a further 40 million euros "special award" if the company beats its goals.

Proxy advisers Glass Lewis and Institutional Shareholder Services (ISS), as well as Italy's Frontis Governance, said Cattaneo's salary was linked to short-term results and a bonus would be granted even in the case of an early departure.

"Performance should be measured over the (relevant) period as a whole to ensure that executives are being incentivised for long-term growth and not temporary spikes in performance," Glass Lewis said in a copy of its report seen by Reuters.

The proxy adviser added that it was "gravely concerned" with the maximum potential pay that Cattaneo could receive, calling it "excessive".

Last month, BP's (BP.L) investors voted against CEO Bob Dudley's $20 million (£14 million) pay after the group recorded a record annual loss.

Cattaneo was appointed in March to replace Marco Patuano, who resigned over what sources said were clashes on company strategy with top investor Vivendi (VIV.PA).

A shareholder's meeting where Cattaneo's pay will be put to the vote is scheduled on May 25.

Vivendi, which holds a 24.6 percent stake in Telecom Italia and backs Cattaneo, cannot alone ensure his pay is approved, but it could be backed up by other investor funds, who have supported the French company in the past.

In December Vivendi managed to gain four board seats at Telecom Italia and block a share conversion plan that would have diluted its stake.

At the time, proxy advisers had recommended that investment funds who own 65 percent of Telecom Italia vote against Vivendi's proposal, saying four board seats would give it too much influence in view of the share conversion plan.

(Reporting by Stefano Rebaudo, writing by Giulia Segreti; Editing by Alexandra Hudson)