Investors oppose remuneration policy in protest at bonus awards to top 100 executives
Thomas Cook's shareholders have staged the biggest revolt of the year, with nearly half withholding their support for controversial bonus awards made by the travel group to its top 100 executives.
More than 39% of voting investors opposed Thomas Cook's remuneration report at the travel group's annual meeting in London. The protest was the biggest British shareholder rebellion since last November, when 45% voted against executive pay at the Minerva property group.
Many investors also abstained from voting – a more traditional way for investors to demonstrate their anger – bringing the total percentage of shareholders who failed to endorse Thomas Cook's executive pay packages to 47%.
Investors lodged their protest – in a vote that is only advisory and not expected to prompt a rethink by Thomas Cook – after a powerful City group complained on Tuesday that changes to the way bonuses were calculated had artificially inflated senior executives' pay awards.
The Association of British Insurers (ABI) issued a so-called "red-top" alert on a three-year share bonus award granted as part of the 2007 remuneration package for Thomas Cook's 100 most senior staff based on its "total shareholder return".
The ABI said these awards had been artificially inflated after Thomas Cook decided to exclude the impact of the volcanic ash crisis in April 2010. The ash cloud had knocked £82.1m off the group's bottom line, which in turn hit the value of Thomas Cook shares.
The top 100 executives collectively picked up an additional £1.1m, with chief executive Manny Fontenla-Novoa seeing his shareholder return-based bonus rise from £250,000 to £465,000.
Michael Beckett, Thomas Cook's chairman, said the board stood by its decisions, adding that the group took care not to "ratchet up, or leapfrog pay and benefits for our senior people".
He said Peter Middleton, chairman of the remuneration committee, had offered to meet concerned shareholders "to listen to their concerns and enter into dialogue to inform them why we took certain decisions". It is understood that the aim of these discussions is to explain to shareholders the reasons for the pay awards, rather than to negotiate possible changes to them.
The losses inflicted by the credit crunch have made investors increasingly resistant to voting through large bonus awards, whatever the industry.
However, the scale of the revolt at Thomas Cook "was at the extreme end of remuneration votes and has to be taken seriously," said a spokesman for Pirc, a shareholder advisory firm which had also recommended investors oppose the company's pay packages.
This was the biggest revolt so far this year. In 2010 only nine public UK companies out of the 500 that Pirc monitors witnessed greater resistance to an annual meeting resolution and an average of only 5.6% of investors opposed remuneration packages – although that was the highest level since 2004.
Thomas Cook also suffered a bloody nose in another of the resolutions tabled at its annual general meeting. Some 10.7% of investors voted against the re-election of chairman Michael Beckett, the highest vote against the re-election of a director this year.
The large number of votes against Beckett is thought to stem from him being 74 years old and a non-executive director at seven other companies. He does not sit on the remuneration committee.