Stelios says easyJet board manipulated targets to gain bonuses
21.01.12
easyJet has been drawn into another war of words with founder and majority shareholder Sir Stelios Haji-Ioannou. He said yesterday that the budget airline's directors had manipulated performance targets in order to trigger multi-million-pound bonuses, the Scotsman reports.
In a letter to the Prime Minister (who is seeking to increase shareholder power over directors’ remuneration) earlier this week, Sir Stelios said the definition of ‘capital employed’ used by the easyJet board had been distorted, which resulted in a £7 million pay-out for executives. Responding yesterday, easyJet described the accusation as ‘inaccurate, inappropriate and misleading’.
Stelios told David Cameron he was ‘shocked’ that easyJet directors plan to pay themselves bonus shares by achieving a Return on Capital Employed (ROCE) of 12 percent, ‘when in fact the true number is closer to 4 percent. The revised calculation encourages risking more of shareholders’ money as the assets and the debt somehow cancel each other out. So buying Airbuses with 100 percent finance does not increase the capital employed.’
easyJet says it adopted ROCE as a performance measure at the encouragement of Sir Stelios. A spokesman said: ‘His attack on EasyJet is at odds with the clear success of Britain’s biggest airline. 2011 was a record year for easyJet – with our best ever operational performance, highest ever passenger numbers, high levels of customer satisfaction, highest ever profits and a total dividend of just under £200m.’
‘We have made every attempt to meet Stelios to discuss this and other matters and he has consistently refused to do so. We continue to seek to engage with Stelios in a constructive, private basis as we do with all our other major shareholders.’
The claims and counter-claims are the latest in a clash over strategy that has rumbled on for more than three years, with Sir Stelios claiming that easyJet is recklessly expanding its fleet in a depressed market.
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