Jun. 12—THE owner of British Airways is heading for a bruising row with investors over chief executive Luis Gallego's financial rewards.
The expected clash at International Airlines Group's shareholder meeting in Spain on Thursday will come after weeks of chaos following the cancellation of thousands of flights.
The firm wants shareholders to sanction an increase in Gallego's share awards, which means he could boost his pay by several hundred thousand pounds.
Institutional Shareholder Services, Glass Lewis and Minerva Analytics — which all advise pension funds and asset managers — have described the reward package as 'excessive'. They have urged investors to vote against the plan.
IAG's financial health is currently under scrutiny and its shares have failed to recover to anything like pre-pandemic levels. The £1.21 share price has dived by more than 70 per cent since February 2020.
Gallego accepted a significant pay cut in 2021 and took home £1.1 million. His new package puts him in line for £4,682,500 if he hits all his targets in 2022.
The Mail on Sunday revealed earlier this year that Gallego, who was appointed in September 2020, has been provided with a £500,000 pot to help pay for his two homes — one in Spain and the other in the UK.
The amendment to his share awards could potentially increase the maximum he could get under the pay plan from 100 per cent to 150 per cent of his salary.
Sarah Wilson, chief executive of Minerva, questioned IAG's decision, claiming many firms are 'tone-deaf' amid rampant inflation and the cost-of-living crisis.
She said: 'We've got semi riots at Stansted and Heathrow over airlines not being able to organise themselves.
'What is the rationale — either economic or moral — for raising CEO pay at such a difficult time, especially when the company is loss-making.'
Shareholders who want to challenge the company in person rather than online will need to go to Madrid for the annual meeting.This will involve travelling to Heathrow in the early hours to catch the 6.20am flight, returning the same day at a potential total cost of more than £600.
IAG has a significant number of private British investors, many of whom bought their shares in BA's privatisation in 1987.
Director of campaign group ShareSoc, Cliff Weight, said: 'It's a lot of money so they should provide a meeting in London — where most of their shareholders can get to more easily — as well as the formal AGM in Madrid.
'It strikes me that the directors want to hide from their shareholders, who have seen their share price reduce by 75 per cent [since 2020] and are appalled at these egregious remuneration increases.'
IAG said in a recent report: 'The CEO's existing arrangements are becoming increasingly uncompetitive compared to companies both inside and outside the aviation industry.'
As well claiming he was falling behind his peers, the company suggested Mr Gallego might quit for a better-paid role. 'We do not feel that it would be in IAG's or our shareholders' best interests to compromise our ability to retain the current CEO.'
IAG said Gallego had 'seen a significant remuneration reduction in the last two years.'
The company added that he did not receive previous long term incentives and that he had forgone his bonuses for 2020 and 2021, along with voluntary salary cuts for both those years.
ISS argued that the share award increase could set a 'potentially concerning precedent' across the whole market.
Excessive pay awards have sparked significant concern from campaigners in recent months. Ocado was criticised for proposing a £100 million bonanza for chief executive Tim Steiner.
All major airlines have been rocked by major travel disruption since Covid-19 restrictions eased. BA has been among the worst hit. IAG's flagship carrier has been forced to scrap thousands of flights due to staff shortages and IT outages.
It was recently revealed that the airline's total losses since Covid struck in 2020 have reached £10 billion. This emerged after IAG posted a £625 million loss for the first three months of the year.
IAG reports that Gallego is paid just over 20 times the average employee salary, which is one of the lowest ratios in the FTSE 100.
___
(c)2022 the Daily Mail (London)
Visit the Daily Mail (London) at www.dailymail.co.uk/home/index.html
Distributed by Tribune Content Agency, LLC.
