[Anonymous]

[Tete_de_cuvee]

08/06 The FT Reports….

A leading investor group is alerting shareholders to potential departures from best corporate governance practice at IAG.

The Association of British Insurers has issued an amber top alert on IAG’s remuneration report because of proposed changes to executives’ bonus and long-term incentive schemes, as well as what it considers to be unusual arrangements for the chairman’s retirement benefits.

Pirc, shareholder adviser, has objected to the fact that IAG’s directors are not up for re-election at what will be the company’s first annual meeting on June 21.

The combined code on corporate governance recommends that, in the interests of accountability, directors of FTSE 350 companies are subject to annual re-election.

The ABI’s amber top is intended to ensure that investors review the issues flagged by the shareholder group before voting.

… read the full report in the Financial Times – requires subscrition.

http://www.ft.com/companies/airlines

It is sickening how the board are responsible for their own multi-million pay awards which bear little relation to Share Price.

They continue to line their own pockets regardless. Pigs with their snouts in the trough.

Time for a change.

[CXDiamond]

Well spotted Tete. You make good points. Pigs with their snouts in the trough is about right. There is so much wrong at IAG that needs fixiing pay cuts at the top would be more appropriate than bonuses. My brother is a shareholder and a reasonably significant one. I think he will be making his views heard.

Dividends before bonuses!

[Tete_de_cuvee]

This sticks in the craw of shareholders, whilst IAG employees will feel they have been stabbed in the back again by the self-serving leadership team.

The company expects their recruits to “Be Outstanding” yet the board are now planning to lower the bar for executives making it even easier (and it is easy already) to achieve their multi-million bonuses.

The IAG leadership changes employee terms and conditions for the worse, then the board changes their own for the much much better both job security and reward.

Remember the excuse that dividends are not paid as the money is being reinvested to benefit company? This is now evidently fallacious, as obscene amounts are being diverted to fund executives in their retirement.

In Outstanding companies the board share the ups and downs with the employees and shareholders. With IAG it is the antithesis with the board continually enriching itself to an ever greater extent regardless of its dour performance, the state of the company or its abysmal share value.

IAG is a case of appalling corporate governance.

[SimonS1]

IAG are like many companies these days, in difficult times many “leaders” are being exposed as merely decent managers, boards are being exposed for some poor corporate hiring and strategy, and the upshot is to keep it all quiet people are just rewarded for mediocrity.

Fortunately shareholders have increasingly got the bit between their teeth and as we have seen at Aviva and Trinity Mirror there is now a much higher chance of shareholders holding you to account and seeing you on your way.

[CXDiamond]

Let’s just hope the shareholders do hold the board to account. Fat cat pay packages in the absence of dividends is tantamount to theft. Clearly if dividends are not payable, the board are not delivering, quite simple really.

[LuganoPirate]

“IAG, explaining the retirement benefits for Mr Romero and Mr Sanchez-Lozano, said: “This is a legacy contractual arrangement relating to their contracts prior to the British Airways/Iberia merger and does not form part of the IAG policy for new hire service contracts. This arrangement ?is not a part of our remuneration policy going forward.”

If this was agreed pre-takeover, and it was agreed the arrangement was to remain in place, then it would be hard for IAG to get out of this and effectively renege on a contractual obligation.

However, going forward I do feel pay should be directly related not only to performance, but also to dividends. It’s fine to re-invest in the company, which should lead to a higher share price, but it’s not fine to pay ever larger bonuses in businesses that are just not performing.

Ultimately however, the CEO and the board is down to the shareholders, and it’s up to them to vote them in or out!

[Tete_de_cuvee]

From a legal perspective wrt the Chairmen’s retirement funding you are correct LP. However from a moral perspective the behaviour to continually line the pockets of the board regardless of performance is wrong.

Recall the pension arrangements were altered for employees prior to the merger/take-over! It is therefore amoral that the exec’s arranagements were not likewise altered at that time.

The IAG board clearly has no understanding of the real world. Employees will see the take-take-take behaviour of its leaders, it will be demoralising and remove any little goodwill there is. The board expect employees to help the company, whereas they are continually helping themselves. What appalling leadership.

As to shareholders, we need to make our concerns heard – the IAG board gravy train must come to a halt.

[JohnHarper]

I’m a shareholder who is a lot less than happy with performance over recent years. I will certainly be wanting to know about cuts at the top and freezes in pay and no bonuses until there are significant dividends.

The arguement about retaining good people does not wash, if they were good people, performance would be better than it is. Let’s face it, it could barely be worse.

I also agree the workforce have given enough, it’s time the leadership teams demonstrated their capabilities rather than passing the buck while dipping their snouts deeper in the trough.

[LuganoPirate]

I wrote that from a legal perspective Tete. It would be great if they said no to the bonus but they won’t. Morally wrong but sadly, if you have no morals, it won’t make any difference.

Dividends before bonuses should be the shareholders war cry!!!

[ThePole]

The IAG gravy train is just a continuance of the old BA gravy train in its new guise. When the financial crisis was looming, the then board changed the rewards package available to directors not based on financial performance but on KPI’s such as customer satisfaction (from internal surveys it is alleged) as well as other fluffy criteria. This helped ensure that the substantial remunerations be achieved by those who were in these lofty, privileged positions.

This was highlighted by the union at the time, according to my source within BA, but was ignored by many. Rumour has it, apparently, the person who exposed these details has been removed from the company.

As a shareholder in IAG and loyal BA customer, this makes me ponder what is really going on in the upper echelons of the company. Certainly those who can influence the vote at the AGM should be asking such questions. I will.

[RichHI1]

I believe IAG comes in for an undue amount of stick on this website as much as BA tends to get far more favourable treatment from many than it deserves.

That said, the fiduciary duty to deliver value through remuneration has been assisted at operational levels but there is a large area of board and investor remuneration that needs legislative support to shine the light of public scrutiny to root out non value added spanish practices in many large corporations.

[Tete_de_cuvee]

Not quite a Shareholder spring, though another corporate’s shareholders have voted down the executive pay/compensation awards. The law will change to ensure these votes become binding.

http://www.bbc.co.uk/news/business-18414152

It will need some corporate shareholders to voice their concerns with IAG before the Gravy train comes to a halt there.

In addition to spanish practices – being a Spanish Company, the AGM is being held in Spain and in spanish. It is being transmitted into the city but no questions can be asked unless you are in Madrid. Likewise you cannot vote unless proxy in advance.

It also appears they are seeking approval to allow it to issue new stock (at a future date) to generate upto 1 billion euros. Feeding the pigs more when they haven’t performed – I know which way I will be voting.

I cannot see any voting on the NEDs let alone the rest of the board, talk about accountability – not.

Dividends before bonuses

[BeckyBoop]

Does anyone know how IAG exec pay compares to that of other airlines of the same size regardless of perfomance?

[pixelmeister]

Comparison with other airline pay is easy – just look in the respective company reports. Similar size ? Could look at LH or AF/KLM. The snag is that IAG is a holding company, so minimal staff. BA & IB are operating as self contained units under the IAG umbrella. In reality this sort of setup automatically creates new senior management positions.

Re: the statement by ThePole
‘This was highlighted by the union at the time, according to my source within BA, but was ignored by many. Rumour has it, apparently, the person who exposed these details has been removed from the company.’
which union was that ? BALPA ? GMB ? Unite ?

Always tricky if you disclose confidential information to the wider world. Most organisations treat this as a sackable offence.

[Author]

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