Friday 20 October 2017

Ryanair shareholders revolt over executive bonus scheme

John Mulligan

John Mulligan

SHAREHOLDERS at Ryanair revolted in unprecedented numbers yesterday as the airline pushes ahead with plans for a lucrative new multi-million euro share option scheme designed for its senior executives.

In an rare backlash, a third of shares voted at yesterday's AGM in relation to the bonus scheme were against its implementation.

The plan has been designed to lock in dozens of key senior directors and managers at the airline for five years.

The resolution had been opposed by UK independent shareholder advisory body PIRC (Pensions Investment Research Consultants). It advises pension funds and local authorities.

PIRC opposed it because the new Ryanair share option scheme doesn't have specific targets.

"It is disappointing that the company has not disclosed specific targets; similarly, targets based on share-price movements are not deemed appropriate, as share-price movements are dependent on various factors – most of which are outside management's control," it said.

PIRC claimed that long-term incentive plans for senior executives in any company are not an effective means of incentivising performance.

"These schemes are not considered to be properly long term and are subject to manipulation due to their discretionary nature," it said.

The new Ryanair scheme will target the airline's key senior ranks.

"Any person who is a director or a senior employee of the company or any subsidiary is eligible to participate", according to Ryanair. "It is intended that grants of options under the plan will in practice be limited to key members of the senior management team and directors of the company."

Ryanair chief executive Michael O'Leary isn't set to take part in the new scheme, however. He's already the single biggest individual shareholder in Ryanair, owning 3.6pc of the company. That stake is currently worth €321m.

The new share scheme will be capped at 5pc of the airline's current outstanding shares. Ryanair currently has a stock market capitalisation of around €9bn. That means that, at least in theory, as much as €450m could be made available for the bonus pot.

MISUNDERSTANDING

However, it's been suggested that while the scheme has the potential to award up to 5pc of Ryanair's shares, it will in fact be more modest.

Mr O'Leary denied yesterday that he was concerned at the result of the voting on the resolution to introduce the new share option scheme.

"A lot of that is proxy voting," he claimed. "You get these proxy companies advising against some share option schemes. There's a misunderstanding about the Ryanair share option scheme. It's struck at market prices. Nobody gets discounts."

He said that the last share option scheme introduced by Ryanair accounted for less than 1pc of the total issued share capital and backed the plans as a way of retaining principal staff.

"They are a key way of attracting and retaining what is clearly very talented management. They're not offered to non-executive directors or to myself."

Irish Independent

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