easyjet manager bonus scheme
Thread Starter
Join Date: Jul 2005
Location: UK
Posts: 284
Likes: 0
Received 0 Likes
on
0 Posts
easyjet manager bonus scheme
EASYJET has scrapped its traditional executive bonus scheme and replaced it with one based on only two measures — return on equity and a hoped-for entry into the FTSE 100 group of elite companies.
The new bonus scheme, thought to be the only one of its type at a UK-quoted company, was quietly adopted by the company at an extraordinary meeting at its Luton headquarters 10 days ago.
Quoted British companies usually have long-term incentive plans based on calculations of total shareholder returns compared with a group of peers.
But Sir Colin Chandler, Easyjet’s chairman, said that method was inappropriate because there were not enough quoted low-cost airlines to make a meaningful judgment, and that comparison with a broader group of companies would not be appropriate.
Instead, Easyjet will in future judge senior executives — the scheme applies to its top 50 managers, including recently appointed chief executive Andrew Harrison — by a single measure, the company’s return on equity.
“Return on equity is a very widely used financial benchmark which is directly comparable not only with other airlines, but also with companies in most other industries,” said Chandler.
Last year Easyjet managed a 7.5% return on equity. If the company hits 15% within three years, the managers will receive 100% of their salaries in Easyjet shares. There are intermediate targets along the way that will result in proportionately smaller rewards for smaller gains in return on equity.
The target return-on-equity figure will be calculated by dividing post-tax profit in a given year by average shareholders’ funds in the year.
The airline has also given its managers another star to aim for. If the company becomes a member of the FTSE 100 for at least six months before the end of September 2008, they will qualify for a bonus in shares equivalent to their total annual salary.
But there is a catch. To qualify for the FTSE 100 award, executives will have to stay in employment with Easyjet for an additional three-and-a-half years after the airline has made it into the top 100 British companies.
And Easyjet still has some way to go before it is in danger of paying out the FTSE 100 award. It would have to more than double its current market capitalisation to enter the elite group. It closed on Friday at 258¾p, equivalent to a market value of £1.14 billion. Today the threshold for FTSE 100 membership is £2.4 billion.
The company has also put one other obstacle in the way of executives who might be tempted to cash out quickly in the event that they recieve share bonuses. All members of the airline’s management board, who report direct to the chief executive, will not be allowed to sell their shares until they build up to a value equivalent to their annual salary.
In a circular to shareholders ahead of the annual meeting, the company’s remuneration committee defended its novel pay strategy. “The committee is aware that the approach it intends to adopt in relation to the performance conditions is unusual. However, the committee is firmly of the belief that this approach is very appropriate for Easyjet,” the circular said.
Fuel prices are at historic highs, but transport analysts remain cautiously bullish about low-cost airline stocks, and those of Easyjet and Ryanair in particular.
Chris Avery, airline analyst at JP Morgan, said: “Although high fuel prices must have an impact on earnings growth at some stage, the reality is that fuel-price surcharges by the network airlines are creating a positive revenue environment for low-cost carriers.”
The new bonus scheme, thought to be the only one of its type at a UK-quoted company, was quietly adopted by the company at an extraordinary meeting at its Luton headquarters 10 days ago.
Quoted British companies usually have long-term incentive plans based on calculations of total shareholder returns compared with a group of peers.
But Sir Colin Chandler, Easyjet’s chairman, said that method was inappropriate because there were not enough quoted low-cost airlines to make a meaningful judgment, and that comparison with a broader group of companies would not be appropriate.
Instead, Easyjet will in future judge senior executives — the scheme applies to its top 50 managers, including recently appointed chief executive Andrew Harrison — by a single measure, the company’s return on equity.
“Return on equity is a very widely used financial benchmark which is directly comparable not only with other airlines, but also with companies in most other industries,” said Chandler.
Last year Easyjet managed a 7.5% return on equity. If the company hits 15% within three years, the managers will receive 100% of their salaries in Easyjet shares. There are intermediate targets along the way that will result in proportionately smaller rewards for smaller gains in return on equity.
The target return-on-equity figure will be calculated by dividing post-tax profit in a given year by average shareholders’ funds in the year.
The airline has also given its managers another star to aim for. If the company becomes a member of the FTSE 100 for at least six months before the end of September 2008, they will qualify for a bonus in shares equivalent to their total annual salary.
But there is a catch. To qualify for the FTSE 100 award, executives will have to stay in employment with Easyjet for an additional three-and-a-half years after the airline has made it into the top 100 British companies.
And Easyjet still has some way to go before it is in danger of paying out the FTSE 100 award. It would have to more than double its current market capitalisation to enter the elite group. It closed on Friday at 258¾p, equivalent to a market value of £1.14 billion. Today the threshold for FTSE 100 membership is £2.4 billion.
The company has also put one other obstacle in the way of executives who might be tempted to cash out quickly in the event that they recieve share bonuses. All members of the airline’s management board, who report direct to the chief executive, will not be allowed to sell their shares until they build up to a value equivalent to their annual salary.
In a circular to shareholders ahead of the annual meeting, the company’s remuneration committee defended its novel pay strategy. “The committee is aware that the approach it intends to adopt in relation to the performance conditions is unusual. However, the committee is firmly of the belief that this approach is very appropriate for Easyjet,” the circular said.
Fuel prices are at historic highs, but transport analysts remain cautiously bullish about low-cost airline stocks, and those of Easyjet and Ryanair in particular.
Chris Avery, airline analyst at JP Morgan, said: “Although high fuel prices must have an impact on earnings growth at some stage, the reality is that fuel-price surcharges by the network airlines are creating a positive revenue environment for low-cost carriers.”
Join Date: Aug 2005
Location: luton
Posts: 6
Likes: 0
Received 0 Likes
on
0 Posts
More corporate greed?????
Where was it notified to shareholders that there was to be an EGM? Who makes up the renumeration comittee? Why are the directors deciding there own pay awards?
Some good news depending on how you look at nit though, it appears they are introducing a bond style agreement to the directors with the directive they have to remain with the company for three years to recieve their bonus.
Where was it notified to shareholders that there was to be an EGM? Who makes up the renumeration comittee? Why are the directors deciding there own pay awards?
Some good news depending on how you look at nit though, it appears they are introducing a bond style agreement to the directors with the directive they have to remain with the company for three years to recieve their bonus.
Join Date: Jan 2005
Location: LGW
Age: 51
Posts: 539
Likes: 0
Received 0 Likes
on
0 Posts
Webstir
I had notification earlier this month via 'Capita Share Plan Services' of the scheduling of an EGM on Thursday 15th of September 2005.
The notification gave details of voting for or against the 'Long Term Incentive Plan'.
If you personally are not a share holder, then there is absolutely no reason for you to have been notified of the planned EGM - however, if you are a holder of shares under the BAYE scheme, you should have received notification from Capita.
However (again) if you are just a holder of share options under the SAYE option, then you have no voting rights whatsoever UNTIL you have finished paying all your subs and the shares are registered in your name.
I had notification earlier this month via 'Capita Share Plan Services' of the scheduling of an EGM on Thursday 15th of September 2005.
The notification gave details of voting for or against the 'Long Term Incentive Plan'.
If you personally are not a share holder, then there is absolutely no reason for you to have been notified of the planned EGM - however, if you are a holder of shares under the BAYE scheme, you should have received notification from Capita.
However (again) if you are just a holder of share options under the SAYE option, then you have no voting rights whatsoever UNTIL you have finished paying all your subs and the shares are registered in your name.
Join Date: Dec 1999
Location: UK
Posts: 1,608
Likes: 0
Received 0 Likes
on
0 Posts
Who mentioned an EGM?
Shareholders have no say in compensation - just a right to express their feelings in a vote at the AGM.
The change is probably as a result of International Accounting Standards, which make share options more expensive the previously (though no cash effect occurs).
Directors always decide their own pay through the remuneration committee chaired and membered by the non-executive board members, therefore allowing independence from those actually running the company.
Shareholders have no say in compensation - just a right to express their feelings in a vote at the AGM.
The change is probably as a result of International Accounting Standards, which make share options more expensive the previously (though no cash effect occurs).
Directors always decide their own pay through the remuneration committee chaired and membered by the non-executive board members, therefore allowing independence from those actually running the company.
Last edited by Re-Heat; 6th Oct 2005 at 12:34.
Join Date: Jul 2003
Location: UK
Posts: 17
Likes: 0
Received 0 Likes
on
0 Posts
I cannot believe the shambles that is easyjet at the moment. For the last 18 months nothing of interest has happened - oh sure lots of those nice shiny 319s - so what? When will the next base be announced? SXF was opened nearly two years ago and s*d all has happened since.
FR on the other hand are just accelerating away with schemes, plans, basically moving forward with drive and determination - what the heck are we doing? Drifting around in circles - no leadership, no vision.................UNLESS YOU'RE ONE OF OUR VAUNTED LEADERS WHO ELECT ANOTHER DIP IN THE TROUGH FOR THEMSELVES.
Enough is enough - I'm off
FR on the other hand are just accelerating away with schemes, plans, basically moving forward with drive and determination - what the heck are we doing? Drifting around in circles - no leadership, no vision.................UNLESS YOU'RE ONE OF OUR VAUNTED LEADERS WHO ELECT ANOTHER DIP IN THE TROUGH FOR THEMSELVES.
Enough is enough - I'm off
Join Date: Jul 2002
Location: In the sticks
Posts: 9,847
Likes: 0
Received 0 Likes
on
0 Posts
Easy are losing the plot - Ryanair now 4 times the size of easy at STN, which is being looked at very closely.
Join Date: Apr 2002
Location: Put out to graze
Age: 64
Posts: 1,046
Likes: 0
Received 1 Like
on
1 Post
what a load of dribble you guys talk,
Is this a record??? A thread started about a bonus scheme has changed in to a Ryanair v's easyJet ramble in the space of 5 posts
please please please.........
GET A LIFE!
Is this a record??? A thread started about a bonus scheme has changed in to a Ryanair v's easyJet ramble in the space of 5 posts
please please please.........
GET A LIFE!
