Shareholders challenged the grant of 10 million stock options to Ryanair chief executive, Michael O'Leary, at the airline's annual general meeting on Thursday.
A vote on the company’s remuneration report, which signals shareholders’ approval of executive pay and bonuses, passed with only a narrow 50.5 per cent majority at the meeting.
Jocelyn Brown, senior investment manager with British rail workers' retirement fund, RPMI Railpen, a Ryanair investor, questioned why the airline agreed to grant chief Mr O'Leary 10 million share options if the stock price and profits double over the next five years.
Mr O’Leary signed a new five-year contract with Ryanair in April, which halved both his salary and bonus to €500,000 each, but pledged to give him 10 million share options if he met the performance targets.
Speaking after the meeting, Mr O’Leary argued that the deal was a “free bet” for shareholders as he would get nothing if he failed to double both the share price and profits.
“You can understand why certain shareholders think that’s far too generous, but I think most shareholders would take the view, if he doubles the share price in the next five years, we almost don’t care what you pay him,” he added.
Mr O’Leary, who owns 3.9 per cent of Ryanair, said that the airline had agreed in talks with shareholders to drop share options in future in favour of a long-term incentive plan, a bonus scheme used by most quoted companies to pay and retain executives.
He pointed out that non-executive directors would also get some benefits under this scheme.
Important to the company
Responding to Ms Brown's questions at the meeting, Ryanair non-executive director and remuneration committee chairman, Howard Millar, argued that signing up Mr O'Leary's services for a further five years was very important to the company.
He explained that the board had calculated that the deal with Mr O’Leary would cost Ryanair €1.6 million a year, significantly below what comparable businesses pay their executives.
Mr Millar stressed that the shares would only be given to Mr O’Leary if Ryanair’s stock price doubled.
“The board very strongly believes that it is in the best interests of the company,” he said.
