ICG shareholders advised to vote against executive pay packages

‘Continued lack of disclosure’ on ICG’s annual bonus awards, share advisory firm says

Ferry operator Irish Continental Group’s fuel costs rose 25.2 per cent to €40.3 million in 2017. Photograph: Eric Luke

Ferry operator Irish Continental Group’s fuel costs rose 25.2 per cent to €40.3 million in 2017. Photograph: Eric Luke

 

Share advisory firm Institutional Shareholder Services (ISS) has recommended that shareholders in Irish Continental Group (ICG) reject the company’s remuneration report due to a “continued lack of disclosure” on annual bonus awards.

In advance of ICG’s annual general meeting on May 10th, ISS issued a report saying the ferry company’s remuneration practices were “not in line with market standards”.

The advisory firm found “insufficient disclosure on annual bonus awards in particular”.

ICG, the owner of Irish Ferries, advised ISS that it had a concern over public disclosure of targets where it operates in a competitive landscape where its main direct competitors are privately held. ICG said that while it would not disclose the actual payout formula, there was a high correlation to earnings-per-share performance.

However, ISS flagged that given the bonus of the company’s chief executive, Eamon Rothwell, was equivalent to 408 per cent of his base salary, “the disclosure around performance targets achieved leading to such significant payouts is even more important”.

“Some comfort can be taken from the fact that the chief executive’s entire bonus is paid in shares, therefore further aligning the chief executive’s interests with shareholders,” it added.

Bonus

Mr Rothwell’s basic salary last year rose 2.3 per cent to €538,000 while he received a bonus worth €2.195 million in restricted shares. Mr Rothwell must hold the shares in ICG for a period of five years. The chief executive remains the single largest shareholder in ICG, holding 15.4 per cent.

In its report, ISS noted that Mr Rothwell’s bonus is contractual, dating back to 1988 when the company floated on the stock exchange, and did not appear to be subject to any cap. It suggested that Mr Rothwell’s maximum bonus should be 200 per cent of his salary, as opposed to the current 408 per cent.

Although negative on the chief executive’s pay, ISS found non-executive director fees to be “in line with best market practice” and not considered to be excessive. ICG stopped giving long-term incentive awards to executive directors in 2015.

ICG has had a troubling few weeks after releasing its results for 2017 at the end of March. The results showed increased fuel costs and weaker sterling led earnings before interest, taxes, depreciation and amortisation to fall 3 per cent to €81 million.

Irish Continental operates in two divisions; the ferries division, which offers passenger and roll-on, roll-off freight services; and the container and terminal division.

The company’s fuel costs rose 25.2 per cent to €40.3 million in the period, although company chairman John B McGuckian flagged the year as a successful one.

Late last month the company was forced to cancel a number of bookings, thus discommoding about 12,000 passengers, on its new MS WB Yeats ferry scheduled to depart in July.

ICG was informed that delivery of the vessel was “likely to be delayed”, thus prompting it to cancel the bookings “in the interests of minimising the level of potential disruption” to passengers.