Ryanair CEO Michael O'Leary is facing a potential shareholder revolt at the airline's upcoming annual meeting, as major advisory firms have urged investors to oppose a significant bonus payout plan. The proposed package could award O'Leary more than £130 million.
Under an agreement reached in June, O'Leary, who has led Ryanair since 1994, is set to continue his tenure until 2032. The deal includes provisions for a substantial bonus if he remains with the company for the next six years and specific performance targets are met. These targets involve either Ryanair's annual profit exceeding €4 billion or its share price surpassing €42 for 28 consecutive days. Currently, Ryanair's stock is trading at €23.30.
While Ryanair asserts that these targets will generate significant value for shareholders, advisory group ISS has advised investors to vote against the plans. ISS acknowledged positive aspects of the scheme but expressed concern over the "potentially very large" payout, highlighting that a €42 share price could allow O'Leary to purchase shares worth €420 million for €267 million. The firm also noted that macroeconomic factors unrelated to O'Leary's performance could trigger the share price target, and that meeting the profit target for only one year might not adequately penalize a decline in subsequent years.
Another advisory firm, PIRC, also recommended rejecting the proposals due to "material" concerns about the remuneration plans.
The brewing opposition comes as the airline industry grapples with the repercussions of geopolitical events, including the Iran war, which has driven up fuel prices and disrupted travel across Europe. Ryanair has previously warned that airfares may increase if high global oil prices persist into the next summer, potentially leading to the collapse of some competitors. The airline has already adjusted its traffic target for the current financial year, reducing it to 214 million passengers from 216 million, to mitigate exposure to unhedged oil prices during the winter season. Profits are also anticipated to fall short of last year's record figures. These market conditions present a significant challenge for O'Leary in meeting the performance criteria for his bonus, particularly as Ryanair's share price has declined by 22% this year from a January high.