Two independent corporate governance consultancies have advised pension funds to support easyJet founder Sir Stelios Haji-Ioannou's in his battle to vote down the company's remuneration report at Thursday's annual meeting.

London-based PIRC, and US group Glass Lewis, have both recommended that investors, including a number of pension funds, reject plans to award the airline's ten executives an £8 million bonus payout. The influence that both firms wield on the two sides of the Atlantic will make Thursday's pay vote "too close to call" according to insiders.

PIRC have issued a report to clients stating that they have concerns on "both the scope and nature of the Remuneration Policy at easyJet".

The report also cited concerns about the complexity and lack of reasoning behind recent changes to bonus structures that now offer execs an annual bonus, long-term incentive plan, matching share scheme and an executive share option scheme, in addition to their base salaries. easyJet chief executive Carolyn McCall earned a total of £1.5 million in 2011, including a bonus of £840,000.

Three large institutional shareholders have pledged to use their 16.5% of easyJet votes to support the remuneration report. Standard Life, M&G and Sanderson Asset Management are reported to be worried about Sir Stelios using his 37% minority holding to cause constant unease amongst the board of the low-cost carrier.

Standard Life is reported to be taking the exceptional step of sending its governance and stewardship director to Thursday's meeting at Luton Airport to make a speech supporting the board. Standard Life told the Daily Telegraph that it is happy that the airline's strategy will continue to reward shareholders having made record £248 million profits and boosted passenger satisfaction in 2011.

Sir Stelios needs to entice another 14% of shareholders into joining his rebellion to defeat the easyJet board on pay for the second year running. While the support of significant UK institutional asset managers makes defeating the board harder, several US asset managers with minority holdings could vote in line with Glass Lewis's call to reject the pay plan.

Individual pension funds holding easyJet shares also have a right to overrule their asset managers should they agree with PIRC's call to reject the plan.

The vote on the remuneration report is only an advisory one, and last year the board ignored the rejection to approve the pay plan regardless. Analysts expect a second defeat may lead to resignations, however.

Sir Michael Rake dismissed the PIRC recommendations, saying: "easyJet is not surprised by PIRC's recommendation given its well-documented position on remuneration. In the last year PIRC has recommended in favour of just six of the FTSE 100's remuneration reports."

Sir Rake added that rival corporate governance agency ISS and the Association of British Insurers (ABI) have both recommended approving the remuneration report. He also defended the complexity of the pay plans for providing a better incentive for performance.

PIRC also advised pension funds to abstain on the re-election of Chairman Sir Michael Rake, noting "there are concerns over his potential aggregate time commitments".

Sir Rake is one of four directors that Sir Stelios has pledged to vote against on re-election, with the flamboyant founder reportedly concerned about Sir Rake's other role as chairman of KPMG international, auditor to Airbus. Last year, easyJet made a major new order of Airbus aircraft.

Sir Rake stated that he has a number of board positions at BT, Barclays, McGraw Hill and others but spends one day each week working on his easyJet duties. He added that easyJet has had an "excellent deal" in buying 264 Airbus aircraft since 2002.

dbillingham@wilmington.co.uk

First published 22.02.2012