Stakeholder Conflict | Edexcel Business A2

[Maximum number: 20]

Extract E Shareholders in carmaker Stellantis reject CEO's pay plan Stellantis is the world's fourth-biggest carmaker and its brands include Peugeot and Fiat. At an investors' meeting in April 2022, just over 52% of Stellantis shareholders voted against the pay of the Chief Executive Officer (CEO). Shareholders rejected a proposed €19m pay package for the carmaker's CEO Carlos Tavares. They objected to the 17.6% increase in his pay. This would have put Carlos Tavares at the top of the pay scale for European car CEOs. In comparison, Herbert Diess, the CEO of the Volkswagen Group, was due a total of €8.6m for 2021. In the US, pay packages have tended to be larger with Jim Farley, CEO of Ford Motor Company, receiving pay of nearly $23m (€22m). The Board of Directors at Stellantis said the vote would be considered and it would detail any changes in its 2022 pay report. The company's share price remained unchanged at €13.97.

Extract F Selected financial data for Stellantis 31 December 2020 and 2021

Table for Question Edexcel A-Level Business A2 3.3.4 2d Stakeholder Conflict Questions question 1 — Edexcel A-Level Business A2

the data in Extracts E and F, evaluate whether the Board of Directors of Stellantis should accept the shareholders' vote.

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general
marking guidance. The indicative content below exemplifies some of the points that
candidates may make but this does not imply that any of these must be included. Other
relevant points must also be credited.
QS: QS1, QS2, QS8 and QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- Shareholders are the owners of a company who have taken a risk by investing
their capital into the business
- As a result, the obligation of the business is to maximise shareholder value by
making profits that can be distributed as dividends and/or achieving
increased share price
- Often there are conflicts between the interests of shareholders and other
stakeholder groups such as employees
- In this case there is a conflict between the shareholders and the Board of
Directors with regard to how much has been proposed to pay the CEO Carlos
Tavares
- Profits and returns to shareholders of Stellantis are likely to be reduced by
excessive pay rises such as this particularly as the CEO of Volkswagen Group is
set to receive only €8.6m in comparison
- Shareholders may be concerned over the demotivating impact on the
employees who may not have received a pay increase and employee
numbers have declined since 2020
- However, Extract E does show that a salary of €19m for Tavares is still lower
than the pay being awarded to Jim Farley of Ford Motors which demonstrates
that such a pay award is comparable to other CEOs in the car business
- If top executives feel they are not valued or properly rewarded, they may
leave the company and go elsewhere. In such a case it may be hard to find a
suitable replacement
- Not awarding the pay package may act as a disincentive and may result in the
CEO not working as hard for the shareholders
- Extract F does show that there have been significant improvements in the
financial position of Stellantis under the leadership of Tavares warranting such
a pay increase
- Revenue has increased by 213.54% and profit for the year has increased by
602.32%
- Shareholder returns in the form of earnings per share have increased from €1.41 to €4.64 indicating that the CEO deserves remuneration to reflect this
improvement
- 48% of the shareholders did not vote against the pay award and so may
actually have been in favour of it

Level	Mark	Descriptor
	0	No rewardable material.
Level 1	1-4	Isolated elements of knowledge and understanding. Weak or no relevant application of business examples. An argument may be attempted, but will be generic and fail to connect causes and/or consequences.
Level 2	5-8	Elements of knowledge and understanding, which are applied to the business example. Arguments and chains of reasoning are presented but connections between causes and/or consequences are incomplete. Attempts to address the question. A comparison or judgement may be attempted but it will not successfully show an awareness of the key features of business behaviour or business situation.
Level 3	9-14	Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Uses developed chains of reasoning, so that causes and/or consequences are complete, showing an understanding of the question. Arguments are well developed. Quantitative and/or qualitative information is introduced in an attempt to support judgements, a partial awareness of the validity and/or significance of competing arguments and may lead to a conclusion.
Level 4	15-20	Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Uses well-developed and logical, coherent chains of reasoning, showing a range of cause and/or effect(s). Arguments are fully developed. Quantitative and/or qualitative information is/are used well to support judgements. A full awareness of the validity and significance of competing arguments/factors, leading to balanced comparisons, judgements and an effective conclusion that proposes a solution and/or recommendations.

Edexcel A-Level Business A2 3.3.4 2d Stakeholder Conflict Questions question 1