British Airways owner arrives to pay for the storm: IAG boss faces backlash over stock bonanza – as families brace for summer flight chaos
- IAG wants shareholders to approve an increase in Luis Gallego stock awards
- Advisors Glass Lewis and Minerva Analytics describe the package as ‘excessive’
- Both urged investors to vote against the plan
- IAG shares failed to recover to pre-pandemic levels
The British Airways owner is heading into a deadly row with investors over chief executive Luis Gallego’s financial rewards.
The expected clash at International Airlines Group’s shareholders’ meeting in Spain on Thursday will come after weeks of chaos following the cancellation of thousands of flights.
The company wants shareholders to approve an increase in Gallego’s share awards, which means he could raise his salary by hundreds of thousands of pounds.
Turbulence: The shock expected at International Airlines Group’s shareholders’ meeting in Spain on Thursday will come after weeks of chaos following the cancellation of thousands of flights
Institutional Shareholder Services, Glass Lewis and Minerva Analytics – which advise all pension funds and asset managers – called the rewards package “excessive”. They urged investors to vote against the plan.
IAG’s financial health is currently under intense scrutiny and its shares have not returned to levels comparable to pre-pandemic levels. The £1.21 share price has fallen over 70% since February 2020.
Gallego took a major pay cut in 2021 and took home £1.1m. His new package puts him in line for £4,682,500 if he hits all of his targets in 2022.
The Mail on Sunday revealed earlier this year that Gallego, who was appointed in September 2020, received a £500,000 pot to help pay for his two homes – one in Spain and the other in the UK .
Changing his stock awards could potentially increase the maximum he could get under the compensation plan from 100% to 150% of his salary.
Sarah Wilson, chief executive of Minerva, questioned IAG’s decision, saying many companies are “deaf” amid soaring inflation and the cost of living crisis.
She said: ‘We have semi-riots at Stansted and Heathrow due to airlines not being able to organize themselves.
“What is the justification – economic or moral – for increasing the CEO’s salary at such a difficult time, especially when the company is loss-making.”
Shareholders who wish to challenge the company in person rather than online will need to travel to Madrid for the annual meeting. This will involve traveling to Heathrow early in the morning to catch the 6.20am flight, and returning the same day at a potential total cost of over £600.
IAG has a significant number of British private investors, many of whom bought their shares when BA was privatized in 1987.
ShareSoc campaign group manager Cliff Weight said: ‘It’s a lot of money so they should arrange a meeting in London – where most of their shareholders can go more easily – as well as the Official AGM in Madrid.
“It strikes me that the directors want to hide from their shareholders, who have seen their share price drop by 75% [since 2020] and are appalled by these blatant pay increases.
IAG said in a recent report: “Existing CEO arrangements are becoming less and less competitive with companies both inside and outside the aviation industry.”
As well as claiming he was falling behind his peers, the company suggested Mr Gallego could step down for a better paid role. “We do not believe it would be in the best interests of IAG or our shareholders to compromise our ability to retain the current CEO.”
IAG said Gallego has “seen a significant reduction in compensation over the past two years.”
The company added that he had not received any long-term incentives and had waived his bonuses for 2020 and 2021, as well as voluntary pay cuts for those two years.
ISS argued that the increased share allocation could set a “potentially worrying precedent” across the broader market.
Excessive wage rewards have raised serious concerns among activists in recent months. Ocado has come under fire for offering a £100million windfall to chief executive Tim Steiner.
All major airlines have been rocked by major travel disruptions since the easing of Covid-19 restrictions. BA was among the hardest hit. IAG’s flagship carrier was forced to cut thousands of flights due to staff shortages and IT outages.
It was recently revealed that the airline’s total losses since Covid hit in 2020 have reached £10billion. It came after IAG posted a loss of £625m 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 on the FTSE100.