Henry Nicholls/AFP via Getty Images
While CEOs are notorious for doing anything and everything to appease their shareholders, the head of Europe’s largest airline just told his to “grow up.”
The comments came after some Ryanair [NASDAQ: RYAAY] investors balked at a new share rewards scheme drafted by the company’s board of directors to keep chief executive Michael O’Leary, who’s been with the company for more than three decades and has delayed his retirement multiple times, at the helm for a few more years.
Must Read
The contract will award the 65-year-old a whopping €150 million (roughly $171 million) in Ryanair stock options if he’s able to reach certain key objectives; mainly, ensuring the carrier clears €4 billion in net income, and/or sees its shares — presently worth €23.24 — rise to or above the €42 mark for at least 28 days straight.
According to reports, though the majority of those with stock in the company (just over 60%) approved of the plan, the votes fell below the 75% approval threshold needed for the company to sign off on it without further consultations.
O’Leary brashly told the Financial Times that those opposed — who some news outlets describe are in full-on revolt — need to “grow up,” as the bars he’ll need to meet to get the payout are “very ambitious, very aggressive targets.”
“If they’re delivered, all of you shareholders will almost double your money from where the share price is today,” he added — something the carrier itself echoed in a statement.
Stock options for performance are nothing new
Because the options package is for a set number of shares rather than a set dollar amount in shares, the results will depend on how well the company continues to do under O’Leary’s leadership.
This type of executive compensation has been standard practice at Ryanair in recent years (and across the private sector for decades), as O’Leary receives, in his words, only a “modest annual salary” in addition to such performance-based bonuses. He’s even compared his and others’ option values to the sky-high salaries in professional sports, which he’s pointed out “nobody says boo” when those salaries creep into the dozens of millions of GBP per year.
Among the supporters of this latest remuneration package are Holland Advisors founder and shareholder Andrew Hollingworth, who called O’Leary “one of Europe’s very best CEOs” for driving the company to new heights and bringing about “great long-term investment returns to shareholders” in the process.
While some apparently don’t find the proposed goals lofty enough, the targets call for O’Leary to increase the low-cost airline’s full-year after-tax profits by at least a stunning 77% from where they currently are, and/or boosting share value by 81% or more.
How oil prices may affect O’Leary’s payout
While hitting these lofty goals may be possible, given O’Leary’s track record for meeting benchmarks at the brand, it’s no secret that the aviation industry is feeling the pressures of surging oil prices as the Strait of Hormuz remains constrained.
In his interview with the Financial Times, the business titan predicted flight ticket prices will increase by 10% to 20% by summer 2027’s busy travel season and could go far higher if costs remain this high for years. However, O’Leary admits that Europe’s habit of “underpricing” airfares compared to the rest of the world is a factor.
“If [jet] fuel stays at $140 a barrel for the next five years, the average air fare will go from €50 to €80-€90 a ticket,” he said.
Based on his previous contract with Ryanair, O’Leary was due to step down in 2028.
“I don’t want to hang around till 96 like [Warren] Buffett,” he said when talks of another tenure extension started up last year.
What To Read Next
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
This article originally appeared on Moneywise.com under the title: ‘Grow up’: Ryanair CEO defends earning €150 million in share rewards, says airfares may increase 20% by summer 2027
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.