TUI Falls Short of U.K. Expectations on Pay, ISS Says

  • Criticism comes as May’s government fights pay inequality
  • German tour operator says the commentary has been ‘noted’

Tour operator TUI AG’s executive compensation came under attack by a shareholder advisory group as U.K. investors target excessive pay packages.

TUI’s corporate governance arrangements “fall short of U.K. investor expectations,” ISS said in a report to shareholders ahead of the company’s annual general meeting on Tuesday. While it’s based in Hanover, Germany, TUI is a member of the premium segment of the main market of the London Stock Exchange and about 30 percent of the company’s shareholders are from the U.K

“We’ve seen some of the commentary, and it’s been noted by our chairman,” said Hazel Newell, TUI’s investor relations manager. “Our intention is to adhere” to the regulations in Germany and the U.K., but under German disclosure rules the company is not required to have shareholders vote on remuneration, she said.

Governance groups have recently led successful campaigns to revise executive pay packages at other British companies such as Imperial Brands Plc and Thomas Cook Group Plc . Prime Minister Theresa May’s government is intensifying an effort to rein in executive rewards and narrow the gap with ordinary workers.

No Vote

“In general, we find that while TUI’s overall corporate governance arrangements are consistent with German practice, there are a number of areas where the company falls short of U.K. investor expectations,” said ISS, whose members represent 20 percent of the FTSE 100 by market value. “The lack of any vote (even advisory, rather than binding) on remuneration-related matters represents a significant area of departure from U.K. market standards.”

ISS criticized TUI for not providing shareholders with a vote on its remuneration report, and for allowing six management-board members to receive transaction bonuses without disclosing the company’s “stringent performance criteria.” Transaction-related bonuses are “not in line with best U.K. market practice,” and investors typically expect bonuses to be linked to business targets, it said.

TUI has been in the premium segment of the main market of the London Stock Exchange since the merger of TUI AG and TUI Travel in December 2014. It operates the Thomson and First Choice brands. Competitor Thomas Cook Group Plc has also been under fire and modified a pay plan for Chief Executive Officer Peter Fankhauser after investors with about one third of the holiday company’s shares voted against a proposal last week, people familiar with the matter said.

Meanwhile, Imperial Brands withdrew its new executive pay policy, which could have given its CEO Alison Cooper a raise of as much as 3 million pounds to 8.5 million pounds when it looked as if it might lose the vote.

(Corrects reference to remuneration vote in third paragraph.)
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