Smurfit Kappa plans CEO bonus boost as pay soars to €5.26m

Review of maximum potential awards follows 12% share price rise last year

Smurfit Kappa is planning to improve the terms of a share bonus plan to top managers, after the chief executive of the cardboard box maker, Tony Smurfit, saw his pay package jump by 43 per cent last year to €5.26 million.

The company said in its latest annual report that it plans to increase potential awards on its performance share plan to as much as 250 per cent of Mr Smurfit’s salary from 225 per cent currently.

It also aims, subject to a shareholder vote at an annual general meeting at the end of April, to increase stock bonus awards for chief financial officer Ken Bowles from 180 per cent of salary to 205 per cent.

Smurfit Kappa chairman Irial Finan said in a letter to shareholders that the planned bonus boost came as the remuneration committee considered "whether the current incentive opportunities were appropriate in light of the size and complexity of the group's operations and continued to reflect both the performance and the calibre of the executive directors".

The chair of the remuneration committee, John Moloney, said that a review occurred against the backdrop of Smurfit Kappa delivering €3.85 billion of "shareholder value" through market value growth and dividends since the end of 2017.

While Mr Smurfit’s basic salary remained unchanged at €1.11 million last year, his variable pay, including cash bonuses and share awards, jumped to €3.89 million from €2.29 million in 2019.

Pandemic performance

The group’s share price soared about 12 per cent last year, while free cash flow jumped 23 per cent to €675 million and debt declined by 32 per cent to €2.37 billion, driven by a share placing, even as earnings before interest, tax, depreciation and amortisation dropped 9 per cent.

A small portion of potential awards share bonus plans are linked to Smurfit Kappa reducing its CO2 emissions, water discharges and waste going into landfill.

While the company was already benefitting from the growth in recent years in online shopping and a gradual shift from plastic to more sustainable packaging, the pandemic has turbo-charged both trends.

Last November, Smurfit spotted an opportunity to raise €660 million through a share placing to allow the company accelerate its investment over the next three years as customers cry out for more sustainable packaging solutions and e-commerce continues to grow.

The company has identified more than €1.2 billion of investment opportunities.