Tour operator TUI’s executive compensation has come under attack by a shareholder advisory group as UK investors target excessive pay packages.
TUI’s corporate governance arrangements “fall short of UK investor expectations,” said Institutional Shareholder Services (ISS) in a report to shareholders ahead of the TUI’s annual general meeting to be held later today.
While it’s based in Hanover, Germany, TUI is a member of the premium segment of the main market of the London Stock Exchange and about 30% of the company’s shareholders are from Britain. In Ireland, the group owns the likes of Falcon Holidays, TravelMood, and American Holidays.
“We’ve seen some of the commentary, and it’s been noted by our chairman,” said Hazel Newell, TUI’s investor relations manager. “Our intention is to adhere” to the regulations in Germany and the UK, but under German disclosure rules the company is not required to have shareholders vote on remuneration, she said.
Governance groups have recently led successful campaigns to revise executive pay packages at other British companies such as tobacco giant Imperial Brands and Thomas Cook.
British prime minister Theresa May’s government is intensifying an effort to rein in executive rewards and narrow the gap with ordinary workers.
“In general, we find that while TUI’s overall corporate governance arrangements are consistent with German practice, there are a number of areas where the company falls short of UK investor expectations,” said ISS, whose members represent 20% of the Ftse 100 by market value. “The lack of any vote (even advisory, rather than binding) on remuneration-related matters represents a significant area of departure from UK market standards.”
ISS criticised TUI for not providing shareholders with a vote on its remuneration report, and for allowing six management-board members to receive transaction bonuses without disclosing the company’s “stringent performance criteria”.
Transaction-related bonuses are “not in line with best UK market practice,” and investors typically expect bonuses to be linked to business targets,” it said. TUI operates the Thomson and First Choice brands. Competitor Thomas Cook has also been under fire and modified a pay plan for its CEO Peter Fankhauser after investors with about one-third of the company’s shares voted against a proposal last week.
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