EasyJet row over pay continues

EasyJet founder Stelios Haji-Ioannou will withhold his vote on the re-election of chief executive Carolyn McCall. Photograph: Chris Ratcliffe/Bloomberg

A row over boardroom pay at EasyJet will come to a head later today as its founder and largest shareholder urges investors to vote down a motion to award its top executives a multi-million pound pay package.

Stelios Haji-Ioannou, who controls around 38 per cent of Europe's second largest low-cost carrier, has urged his fellow investors to vote against a motion to approve a pay deal that could award 10 executives shares worth some £8 million over the next three years.

The dispute centres around the return on capital employed (ROCE) formula used by EasyJet to measure its performance, which is linked to the long-term incentives awarded to chief executive Carolyn McCall and other senior executives.

Mr Haji-Ioannou, better known as Stelios, believes the formula used by EasyJet inflates the airline's performance and is unhappy that it does not include the costs of leased planes and that balance sheet cash is not included in its calculations. Definitions of ROCE vary between analysts.

EasyJet said it delivered a 12.7 per cent ROCE in the year to the end of September 2011 - beating a 12 per cent target set by Ms McCall. Mr Haji-Ioannou, however, believes the return was closer to 6 per cent.

Though the votes will not have an impact as they are non-binding, the company believes the payout is justified as the airline performed well during the period and paid its first dividend after full-year profit rose a third.

Analysts believe without Mr Haji-Ioannou's backing, it will be difficult for the company to achieve the 50 per cent approval needed to support the pay deal.

"This whole saga has been destabilising and distracting for management but people want to see management rewarded for meeting the right targets which are sufficiently challenging and perhaps that needs to be clarified by the EasyJet board," said an airline analyst who wished to remain nameless.

Mr Haji-Ioannou, who founded EasyJet in 1995, quit the airline's board in 2010 after a row over strategy. Since then he has been critical of many of the airline's plans.

British corporate governance watchdog PIRC advised members to vote against easyJet's remuneration report because of concerns around the complexity of its incentive arrangements.

Standard Life, easyJet's second biggest institutional investor, last week gave public backing to the board, along with M&G and Sanderson. They hold 17.5 per cent of EasyJet's shares.

Mr Haji-Ioannou also plans to vote against the re-election of the chairman, Michael Rake, and three other directors, and will withhold his votes on the re-election of Ms McCall.

Reuters 

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