Sunday 23 July 2017

Nobody is as rich as O'Leary - but some are better paid

From oil tycoons to airline magnates, we delve into the annual reports of Ireland's top-listed companies to find out who gets paid the most

Michael O'Leary at Fairyhouse Racecourse, Co Meath. Picture credit: Ray McManus
Michael O'Leary at Fairyhouse Racecourse, Co Meath. Picture credit: Ray McManus

Sarah McCabe and Gavin McLoughlin

Who would you have said was the highest-paid chief executive among the Irish Stock Exchange's major companies?

Ryanair boss Michael O'Leary is certainly the most prominent, and his company is one of Ireland's biggest corporate success stories. But O'Leary's annual pay package is dwarfed by that of Gary McGann, the low-key boss of what is now a relatively low-profile company - Smurfit Kappa.

The paper and packaging business isn't the sexiest in the world, but making all that container board has certainly made McGann a lot of paper.

He was awarded €7.2m last year, a 36pc increase on 2013.

Both men have had an exceptional year. Ryanair's share price is up 56pc while Smurfit's share price has soared 68pc in the last 12 months, but the company's market capitalisation of €6.7bn is still less than half that of Ryanair.

O'Leary is fond of pointing out that we shouldn't compare other companies to his airline - though mainly when talking about Aer Lingus. The flag carrier is "a small peripheral European airline" in comparison to the behemoth that is Ryanair, he has said.

Yet Aer Lingus' exiting German chief executive Christoph Mueller is another who took home a significantly larger pay packet than Clongowes-educated O'Leary last year.

Mueller - who earlier this year announced his resignation from Aer Lingus and later took the top job at troubled Malaysia Airlines - took home €2.2m in 2014.

His time at Aer Lingus has been warmly received by the airline's board. Its annual report repeatedly mentions that it has managed to sustain four years of operating profits following an operating loss of €81m in 2009.

Mueller's basic salary made up just €475,000 of his total pay. The real cash came from a bonus of €420,000, about 85pc of his salary, and another €400,000 "special bonus" paid out following Aer Lingus' defence of a third takeover attempt from Ryanair. He was also given €175,000 in pension contributions.

Then there are Mueller's long-term incentive shares. Some 700,400 shares conditionally awarded to him in previous years paid out in 2014, after the airline hit required performance targets. Our calculations value them at around €710,913.

Mueller gained another interesting perk last year that is not included in his overall earnings figures either. He left mid-way through a current long-term incentive plan; normally, anyone in that situation loses their right to claim shares under the scheme. Not so for Mueller. The Aer Lingus board felt so favourably disposed towards the German that they decided he should still get a payout if the airline performs into 2016.

O'Leary, chief executive of Ryanair since 1994 and on its board for 18 years, took home a comparably paltry €1.8m. His pay structure is very simple in comparison to the other chief executives of ISEQ-listed companies.

In 2014 it consisted of just two parts, a €1m salary payment and €800,000 bonus. O'Leary (53) gets nothing in the way of a pension contribution; he left the company's defined benefit plan in 2008 and it was later shut down.

These pay figures hide O'Leary's real money maker - his share options.

The Mullingar resident owns 51 million shares in the airline he built virtually from scratch, about 3.7pc of the company. Those shares are worth in the region of€600m. It is no surprise that the Ryanair board feels confident O'Leary is sufficiently incentivised despite his modest salary.

Other chief executives who have amassed huge shareholdings in their companies over the years include Irish Continental Group's Eamonn Rothwell and Tullow Oil's Aidan Heavey.

One of the newest chief executives on the top earners list was also one of the best paid in 2014. It's CRH boss Albert Manifold, who took over from Myles Lee last year. The chartered accountant has worked for the building materials supplier since 1998. He took home €4.3m from CRH last year.

His salary was bumped up from €825,000 to €1.2m and will go up again in 2015, the CRH board decided. He also enjoyed a bonus worth 150pc of his salary - €1.8m - made up of €1.35m in cash and some deferred shares. His pension got a €559,000 injection and benefits of €39,000. Interestingly, CRH uses its benefits package to reimburse its directors for the legal fees they accrue when they negotiate their contracts.

Manifold also took home €647,933 from a long-term share incentive plan that vested 30,448 shares during the year.

He has a long way to go to build up an O'Leary-style stake in CRH though - he owns just 0.8pc of the company, well below finance chief Maeve Carton.

Kerry Group paid its chief executive a similar amount. Stan McCarthy started out on Kerry's graduate programme in 1976 and made it to the top job in 2008. Since then he has overseen the company's successful expansion of its sports and infant nutrition businesses. McCarthy, who is a Kerry native, took home €3.28m last year.

That included a basic salary of €891,000, a bonus of €559,000, a pension contribution of €228,000 and benefits of €72,000 that were twice the average Irish salary of €35,873 a year. He also enjoyed a share payout of €1.4m, after 35,772 shares first awarded in 2011 vested.

Aidan Heavey's pay went the same way as Tullow's share price in 2014: down. He is definitely not the country's highest-paid chief executive any more - though he still holds the record, having pocketed €23m back in 2009 as a bumper bonus share scheme vested.

His Carlow-founded oil company, which has a dual listing on the Irish and London stock exchange, had a disastrous year after oil prices plummeted. Its shares have fallen by 60pc in the past 12 months.

Having failed to hit most of Tullow's performance targets, Heavey missed out on a lucrative award of 300,000 performance-related shares worth about €1.9m based on Tullow's average share price in the last quarter of 2014.

Heavey still managed to take home an impressive £2.5m (€3.5m) in 2014. That includes a base salary of £886,080 - unchanged from the year before - a pension of £221,520 (25pc of salary) and a sizeable bonus of £1,222,790 in cash and shares (138pc of salary). A previous deferred bonus also became available, adding an extra £92,000 to his coffers.

One of the lesser-known companies that makes up the ISEQ's top 20 largest is Dragon Oil. The Dubai-headquartered oil explorer, which recently scrapped a takeover bid for Petroceltic, pays its Saudi Arabian chief executive Abul Jaleel Al Khalifa (57) handsomely.

His €3.4m 2014 pay includes a salary of $965,000 and $1m from shares that vested. Al Khalifa also got €96,00 in benefits for expenses such as schooling "for up to four children".

The Emirates National Oil Company - Dragon's majority shareholder with a little over half of the stock - is currently looking to buy out the rest. In an industry plagued by uncertainty amid oil price turmoil, Dragon's healthy cash flow saw Davy analysts recently label it a safe haven for investors.

Milk quotas were lifted at the start of this month and food giant Glanbia wants to capitalise. The company has invested €185m in a new milk-processing factory to help it boost production in the coming years.

But while best known in Ireland as a dairy company, it is its global performance nutrition arm of the business that is most exciting. This continues to swell with a series of recent acquisitions.

That is all taking place under the stewardship of Siobhan Talbot - the only female chief executive of a top 20 company on the stock exchange. She made €2.7m last year.

Talbot, who became managing director of Glanbia in November 2013, took home a basic of €1.63m, topped up by the vesting of 96,500 shares on July 2 2014. On that date Glanbia shares closed at €11.51 - valuing the shares at €1.1m.

Over at cidermaker C&C it's been a rocky few months. The company failed in its attempt to buy the UK pub group Spirit, and according to one of its shareholders, is now mulling a sale of its UK business.

Despite these problems, the period covered by the last annual report was solid.

Operating profits rose 10.6pc to €126.7m, though the company was disappointed with the mark it left in the US.

Chief executive Stephen Glancey took home €2.2m in the period, made up of basic package of €1.15m and exercising share options worth €1.02m. The Scotsman has been with C&C since 2008 and became chief executive in 2012.

Then there's Owen Killian, the man who brings joy to the Irish people in the form of Cuisine de France bread rolls - the natural home of breaded chicken fillets and fried pork.

He's always up there in the top earners and this year was no different, with Killian bagging second spot on our list. He netted €5.9m at this week's exchange rates, including a bonus that matched his €1.28m salary. The surge in the Swiss franc will have netted him more buying power on trips to Ireland.

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