10 Nov 2020

Share options for Air New Zealand board 'tone deaf' - union

4:36 pm on 10 November 2020

Air New Zealand's board is under attack from unions and investors for issuing share options to senior executives.

Air NZ CEO Greg Foran discusses the airlines response to Covid-19 at Air New Zealand HQ on March 20, 2020.

AirNZ chief executive Greg Foran. Photo: RNZ / Dan Cook

The airline's board last week approved the issue of the options to buy shares to chief executive Greg Foran and six other executives, one of whom has since left, worth more than $2 million.

The E tū union, which represents some Air NZ staff, said the performance rewards were insensitive and the board seemed "tone deaf" to what staff were going through.

The union's head of aviation, Savage, said members had given up pay raises and performance bonuses to help out the airline.

"For the board and the executives to take the share options at this time will do nothing to rebuild the airline's performance. Workers are incensed - it's rubbing salt into an already painful wound."

The airline has laid off more than 4000 staff, slashed spending and services to save cash, and has started drawing down a $900m government loan.

The Simplicity Kiwisaver scheme has about $5m worth of the airline's shares, and its chief executive Sam Stubbs also demanded an explanation.

"The first rule of leadership is that leaders eat last, and that doesn't seem to be the case here," Simplicity chief executive Sam Stubbs said.

"It raises questions about corporate governance - why was this decision made, why did the management accept these options - and the government, which is a 52 percent shareholder, should also be asking these questions."

In a statement, Air New Zealand's board chair Dame Therese Walsh said the national carrier's approach was in line with the standards for public companies, and it was reviewed annually by the board of directors.

"Executive remuneration is disclosed in the Annual Report ... half of the executive team's annual remuneration is at risk via short-term cash incentives and long-term share incentives," Dame Therese said.

"It is important to note that the Chief Executive Officer's total compensation for 2020 will be around 40 percent of his target remuneration.

"What we disclosed to the NZX last week was the long-term incentive share rights for 2020 which mature in 2023. This will not result in any payments being made until 2023; and then only if the company has met its rigorous performance targets. If in 2023, the company is not performing above target, those share rights will lapse."

She said the loan offered by the government was not being used in any way to fund the incentives, and the board was confident the approach appropriately incentivised the airline's management to outperform.

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