Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
Continue Reading Below
Air France-KLM (AIRF.PA) Chief Executive Ben Smith said on Thursday he had given up his 2020 bonus, after a Dutch minister urged executive pay restraint in return for the billions of euros in government aid sought by the airline group.
|AFLYY||AIR FRANCE-KLM S.A.||6.4||+0.39||+6.49%|
Smith, who had offered in March to trim his pay in response to the coronavirus crisis, said in a statement the cut “includes forfeiting my annual short-term variable compensation”.
The move follows an outcry in the Netherlands over new performance criteria that appeared to reward the CEO for attracting state aid - prompting Dutch Finance minister Wopke Hoekstra to call publicly for his bonus to be scrapped.
“Bonuses in these times of crisis are unwise and incompatible with support funded by taxpayers’ money,” Hoekstra told Dutch newspaper De Telegraaf.
Major U.S. airline bosses also agreed to pay cuts as they pursued a multi-billion dollar package of aid for the sector - which ended up imposing hard limits on their total compensation.
In a separate announcement on Thursday, KLM boss Pieter Elbers said he would take a 20% pay cut for the remainder of the year and had also forfeited his bonus.
Air France-KLM is moving towards a rescue deal worth about 10 billion euros ($10.8 billion) in which the Dutch government would guarantee around 2 billion in loans to KLM, sources have said.
Group chairman Anne-Marie Couderc told French senators on Wednesday that talks on a combination of state guarantees and direct loans to Air France should conclude “in coming days”, while an agreement on Dutch support for KLM could take longer.
As the coronavirus shutdown loomed in March, CEO Smith had agreed to reduce his 900,000 euro base pay and bonus of up to 1.35 million euros in proportion to the loss of earnings by furloughed staff - typically around 25% during the layoff period.
But proposals issued to shareholders last week showed that criteria for Smith’s variable pay had been altered to exclude debt reduction, while introducing new conditions including cash conservation and the “obtaining of support and financing.”
“I would like to highlight and repeat the commitment I made on 16 March 2020 to reduce my remuneration by 25% during the COVID-19 crisis,” Smith said on Thursday.
“In the context of the very difficult period that the Air France-KLM Group is currently going through, this reduction clearly includes forfeiting my annual short-term variable compensation (‘bonus’) for the financial year 2020, as well.”
The forfeited pay leaves intact the group CEO’s long-term incentive plan worth a further 2 million euros annually and paid out after three years.