EasyJet’s management received a boost on Wednesday when two influential investor advisory groups signalled support for the airline’s board ahead of what had been shaping up to be a contentious shareholder vote on pay this month.
ISS urged investors to pass all the resolutions in the budget carrier’s 2011 annual report, while the Association of British Insurers issued a “blue top” notice, meaning its review of the report found EasyJet in line with best practice.
The support greatly increases the chances that EasyJet’s remuneration report will win shareholder approval at this month’s general meeting, in spite of plans by the company’s founder, Sir Stelios Haji-Ioannou, to vote it down.
Outside Sir Stelios’s 38 per cent stake, the shareholder register is dominated by institutions that take both advisory groups seriously. M&G Investments, which has a 6.5 per cent stake, said on Wednesday it would vote in favour of all the resolutions.
Investors are concerned that Sir Stelios’s public criticism has distracted from EasyJet’s recent strong performance, and others worry that his campaign, which they view as personal, is being taken to be part of the wider political debate over executive pay.
“We’re concerned that this becomes another one of those stories that activist shareholders have a stab at remuneration at a company and it gets a big vote against, when really it’s about an ex-owner of the company having a pretty public debate with the board about where his investment’s going,” said one City insider.
Sir Stelios’s complaints range from unhappiness over the purchase of new aircraft in January 2011 to the way in which aircraft leases are recorded in the accounts. He says “creative accounting” is delivering executives bonuses they do not deserve.
Earlier this week, Glass Lewis, a US proxy adviser, urged shareholders to vote down the remuneration report, arguing awards granted as part of a long-term incentive scheme (LTIP) should be predicated on more than one metric – in this case, return on capital employed (ROCE).
The ISS also raised concerns over the ROCE calculation, which excludes the cost of some aircraft leases, but said it had been told EasyJet would make changes in the coming year.
Sir Stelios responded: “Investors cannot simply rely on a vague promise by anonymous directors. Until the changes are in effect, I am urging other well-meaning shareholders to vote against the remuneration report or withhold their vote as a protest.”
Sir Mike Rake, chairman, saidon Wednesday: “We will take independent advice, consult shareholders and review carefully the most appropriate way to account for the inclusion of leases in future, including for LTIP grants.” He welcomed the positions of the ISS and ABI, adding: “EasyJet’s remuneration strategy is designed to deliver the performance and long-term success . . . which all our shareholders want.”
Additional reporting by Kate Burgess
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