Pension fund investor also wants Ryanair to plan for successor to Michael O’Leary
Ryanair will come under increased pressure this week to bring in fresh leadership, as investors call for its chairman, David Bonderman, to stand down after more than 20 years.
As well as calling for Bonderman to be replaced, the Local Authority Pension Fund Forum (LAPFF) has told the Irish airline to start planning for a successor to Michael O’Leary, who has been chief executive since 1994.
The LAPFF chair, Ian Greenwood, has written to Michael Cawley, the chair of Ryanair’s nomination committee, saying it will file the resolutions in favour of the changes at the Dublin-listed firm’s next annual meeting in September 2019. LAPFF has not received a response to the letter, sent on 12 October.
LAPFF, which represents the pension funds of local authorities across the UK holding combined assets worth more than £230bn, holds about 1% of Ryanair’s shares. Under Irish company law, investors holding 3% of shares can introduce a resolution, meaning LAPFF must seek the support of other large investors.
It is likely the resolution will gain the backing of enough shareholders, after almost 30% of shareholders voted against Bonderman’s reappointment at the last annual meeting, in September. Royal London Asset Management said it would continue to vote against the reappointment of Bonderman until a new chair is appointed.
Aberdeen Standard’s investment director, Alison Kennedy, has indicated that her firm will vote in favour of a resolution to remove Bonderman in 2019 unless Ryanair makes “clear progress on succession”. However, Aberdeen Standard, which holds a stake of about 0.9%, backed Bonderman at this year’s vote to avoid “unintended consequences”.
Ryanair issued a statement saying: “Ryanair shareholders recently passed all AGM resolutions by a large majority, including the nomination of directors and chairman. They appreciate how fortunate we are to have an outstanding chairman like David Bonderman [to] guide the board and the airline.”
The growing pressure on the Ryanair board follows a torrid year for the budget airline. During the summer and early autumn, staff across Europe staged a series of strikes in disputes over contract terms, forcing the cancellation of hundreds of flights.
Ryanair last week officially recognised unions in Belgium, Spain, Portugal and the UK in a bid to improve relations with workers.
“Ryanair faces a prolonged transition to a more stable employment model and improved industrial relations,” Greenwood wrote in his letter to Ryanair. He said the firm’s “governance has not kept pace” with changes needed in its operating model.
“We consider that more genuinely independent representation on the board could have ensured that these changes were achieved more smoothly,” he wrote.
Bonderman has spent more than two decades as chairman of the Ryanair board, after joining in 1996. The billionaire private equity investor was last year forced to resign from the board of the taxi app firm Uber following sexist comments about the gender balance on the US company’s board. He has indicated that he intends to stay on for another year, but investors want action sooner.
LAPFF said it had concerns over Bonderman’s ability to challenge executives’ decisions, although his presence is considered to be emblematic of a broader lack of independence on the board. Kyran McLaughlin, another member of the board, was also the target of a rebellion at the September meeting on the grounds of independence. Almost a third of investors voted against his reappointment.
Disquiet among investors grew last year when a rostering blunder forced the airline to cancel thousands of flights, denting the reputation of the hard-driving management team.
Ryanair has since endured more unwelcome media coverage in the last fortnight, after a man allegedly racially abused a fellow passenger before takeoff from Barcelona.
The firm was also forced to issue a profit warning last month, blaming the effects of strikes as well as rising oil prices for lower earnings.
O’Leary last week predicted that some airlines could go bust over the winter as Ryanair reported a 7% drop in profits for the six months to the end of September. He also indicated he would stay in post for another two or three years as long as he has the support of the board.