FT.com / By Rose Jacobs

Pressure is mounting on EasyJet over its executive bonus scheme after a US shareholder adviser urged investors to reject the budget airline's pay report.

Glass Lewis, a San Francisco-based company that works for institutional investors, said yesterday that EasyJet's remuneration structure "fails to adequately align executive and shareholder interests", and recommended that shareholders vote down the resolution related to pay at the company's annual meeting this month.

The censure is a boost for Sir Stelios Haji-Ioannou, EasyJet's founder and biggest shareholder, who has taken vigorous exception to the pay proposals. He disputes the board's methodology for calculating return on capital employed, the metric used for determining the size of bonuses executives receive under a longterm incentive plan. He called it a "heads I win, tails you lose" formula.

Glass Lewis's analysts did not say whether Sir Stelios's definition of ROCE should be used over the company's, but questioned the wisdom of employing a single metric to measure performance. "We believe the use of a single performance target may allow for awards that do not reflect overall company performance or shareholder returns," its report said.

Overall, it judged the remuneration structure and policies "poor" and gave only a "fair" rating to the disclosure of those policies.

Sir Stelios said yesterday that the proxy adviser's report was a "significant step in forcing our board to put shareholder interests first".

Only a handful of EasyJet's top 15 shareholders are based in North America, and it is unclear how much sway Glass Lewis has with the UK institutional investors that hold significant stakes in the company. Other corporate governance watchers, including the Association of British Insurers and ISS, an advisory group, have yet to weigh in on the pay debate at EasyJet, although guidance is expected by the end of next week.

At last year's annual meeting, 48 per cent of shareholders voted against approving last year's remuneration report and 7 per cent abstained. Sir Stelios and his family control 38 per cent of EasyJet's shares, so only a handful of institutional investors would need to be persuaded of his case to cause an upset.

Still, one City analyst said he did not expect a significant shareholder revolt. "I would have thought EasyJet would have sounded out the larger investors pretty thoroughly this time, to the extent that it's virtually pre-approved," he said.

EasyJet said yesterday: "We are confident that our shareholders support management and will show that support at the AGM."48% Shareholders who voted against last year's report.