Skift Take

How much is a CEO worth? For years executive pay has increased at a rate completely out of proportion to that of the average worker. This isn't good for business and it isn't good for society.

An influential shareholder group has raised concerns about pay policies at tour operator Thomas Cook Group Plc, adding to pressure on British companies to rein in executive awards as Prime Minister Theresa May highlights concerns about inequality.

The Institutional Voting Information Service issued a warning about a bonus Thomas Cook plans to pay Chief Executive Officer Peter Fankhauser this year, as well as proposed changes to a long-term incentive plan that gives the company greater latitude to reward the CEO.

The advisory group raised its concerns about Thomas Cook in a note to investors after tobacco giant Imperial Brands yielded to shareholder objections and withdrew plans to give CEO Alison Cooper a raise of as much as 3.5 million pounds ($4.4 million). May said soon after taking office last year that she wanted to close the “irrational, unhealthy gap” between workers’ and bosses’ pay, and her government has proposed giving shareholders more say over compensation.

“The remuneration committee engages with shareholder and advisory groups on remuneration during the year and any proposed changes and takes their comments and feedback on board,” Thomas Cook said in a statement.

Thomas Cook’s annual general meeting is set for London on Thursday. At last year’s meeting, 25 percent of shareholders voted against its remuneration report, after terrorist attacks and political turmoil in tourist destinations like Tunisia and Egypt hit the company’s financial results. Despite the tough business conditions the company restarted dividend payments after a five-year hiatus in the year ended September 2016, citing optimism about future bookings and its second successive annual profit.

CEO’s Pay

Fankhauser’s pay was cut to 1.2 million pounds last year from 4.3 million pounds. Thomas Cook said in its annual report that it intended to give him an award of twice his base salary for 2017 to reflect his significant impact on the business. The company later reduced this to 1.65 times salary to reflect a share-price decline as well as feedback from some shareholders. Fankhauser’s base pay last year was 703,000 pounds.

The shareholder advisory service is also concerned about the plan to revamp the incentive plan so that the company would have greater freedom to reward the CEO for strategic initiatives like the disposal of a poorly performing business. The group has not released its concerns publicly, but a spokesman confirmed that a note had been sent to subscribers.

Fankhauser took over in 2014 after the surprise exit of Harriet Green, who had been credited with reviving Europe’s best-known tourism company by shutting high-street shops and boosting online sales.

©2017 Bloomberg L.P.

This article was written by David Hellier from Bloomberg and was legally licensed through the NewsCred publisher network.


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Photo credit: A Thomas Cook shop. The company has come under fire for its CEO pay package. Thomas Cook

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