British Airways owner IAG’s decision to award outgoing chief executive Willie Walsh a bonus of more than £800,000 was criticised on Tuesday by an influential shareholder advisory group.
Institutional Shareholder Services urged investors to reject the airline group’s remuneration plan, which paves the way for a bonus of £883,000 for Mr Walsh in 2019, as part of a total package worth just under £3.2m.
ISS said the bonus awards to Mr Walsh and other top executives were inappropriate as the aviation industry struggles through its worst ever crisis.
Although Mr Walsh’s bonus was down from £1.05m in 2018, the total compensation was higher than the previous year’s £3.03m.
The pay awards were announced in early March, just before the full scale of the Covid-19 crisis became clear. But ISS said “there was ample evidence at the time to suggest that a prudent approach would be warranted”.
IAG had already warned of falling demand for flights by the time it announced the 2019 remuneration. Less than a month later the airline group cancelled its 2019 dividend as disruption hammered the industry.
In particular, ISS noted that BA, one of the fleet of carriers owned by IAG, had made use of government support measures including the Bank of England’s Covid Corporate Financing Facility.
“British Airways’ use of the CCFF draws attention, as the Bank of England has since put in place certain restrictions on companies’ ability to pay bonuses to senior executives where they have accessed financing under the scheme,” ISS said.
IAG said the awards reflected the previous year’s performance, were given in early March, and that half of Mr Walsh’s award was in deferred shares, which do not vest for three years.
“Since then, the worsening impact of Covid on IAG has seen salary reductions for all senior management and the board,” IAG said.
Glass Lewis, another proxy adviser that issues recommendations on votes at AGMs, urged shareholders to back all the motions including executive pay.
Mr Walsh is set to retire from IAG following the annual meeting on Tuesday, where shareholders will also be asked to vote on a €2.75bn emergency fundraising to shore up its balance sheet as the pandemic pushes carriers around the world into crisis.
ISS recommended shareholders should back the rights issue, and all other proposals at the annual meeting.
The prospect of a shareholder revolt comes as BA faces growing criticism of its decision to cut up to 12,000 jobs, almost 30 per cent of its workforce, as the pandemic hits passenger demand.
Huw Merriman, chair of the House of Commons transport select committee of MPs, is among the politicians to have called on BA to reverse its decision, and branded the carrier a “national disgrace” earlier this year.
In response, Mr Walsh said the company was “fighting for its survival”.
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