easyJet founder Sir Stelios Haji-Ioannou today (08/02/12) claimed a “moral victory” in his battle to curb excessive top-level remuneration packages at the budget airline after two more leading  shareholder proxy advisors criticised the self-serving metrics used to calculate executive bonuses.

It means that all 3 proxy advisors who have opined so far have demanded changes. 

Today’s reports from ISS Corporate services Group and the Association of British Insurers follow yesterday’s intervention by proxy advisers Glass Lewis. The overseas consultant heavily criticised easyJet’s pay proposals and recommended voting against the remuneration report.

A further report from London-based PIRC is expected on Friday

ISS said it was satisfied that the proposed changes to methods of calculating directors’ bonuses would bring easyJet remuneration packages into line with accepted international accounting norms while simultaneously addressing Sir Stelios’ concerns. It would therefore advise acceptance of the remuneration report at the forthcoming AGM.

However ISS noted that the deadline for easyJet’s implementation of the new International Financial Reporting Standard had slipped from 2013 to 2015, meaning any recalculation of bonus payments would have to be postponed until then. 

Sir Stelios also noted that ISS’ failure to accept his criticisms of easyjet’s failure to capitalise aircraft leases today as creating a “moral hazard” for another 3-4 years.

He said:

“ISS has a duty to its clients to ensure that they are fully briefed and understand the “moral hazard” the company is faced with today. A recommendation advising investors to support the remuneration report does not take into account the use of a phoney ROCE calculation and the inherent “moral hazard” involved.

“Investors cannot simply rely on a vague promise by anonymous directors. 

“Until the changes are in effect,  I am urging other well- meaning shareholders  to vote against the remuneration report or withhold their vote as a protest.”

He added that some shareholders are themselves listed entities and hence clearly conflicted. 

“They should abstain,” he said.

A second report from the London-based ABI, also acknowledged the merits of Sir Stelios’ arguments in the use of return on capital employed (ROCE) in the calculation of executive bonuses. In particular it welcomed the last minute change offered by the directors to use a rolling three year average to calculate ROCE rather than just the self-serving  final year of the performance period – another issue raised by Sir Stelios.

Sir Stelios said: 

“The ISS report takes  “on trust” the board’s promise to adopt a more sensible  way of calculating bonuses sometime in the future. 

“At least change is happening but not at the speed we need it to happen. 

“We need action now otherwise directors will continue  to trouser shareholder’s cash for at least another three years.  All shareholders are worried about the self-serving nature of these bonus calculations.

“The only difference between me and ISS is that I demand change now and not in 3 years time.  I am willing to call the directors’ bluff if they want to resign. I know we shareholders can replace them easily.  We are in a recession and salaries are going down, not up, like for these guys!  At the end of the day, if I am wrong, I will suffer more of the down side than everyone else.”