Ryanair's defence of O'Leary's €99m bonus target doesn't wash

Photograph: Jasper Jacobs/AFP/Getty

How sweet. Ryanair’s board will “consult” with shareholders, even the 49.5% who protested about Michael O’Leary’s potential €99m (£88m) jackpot, and will report back on how it will “adapt its decision-making to reflect their advice and input”.

Let’s take a guess, though. Ryanair’s contribution may run like this: a majority is a majority, even when it’s 50.5%, and, since the remuneration vote was merely advisory, we’re not obliged to change a thing; so we won’t. It would not be the first company to respond to a rebellion by ignoring it.

Ryanair’s thin justification for the mega-scheme is that shareholders are being given a “free bet”. O’Leary only gets his big payday if annual profits hit €2bn within the next five years or the share price reaches €21 for 28 consecutive days between April 2021 and March 2024.

From today’s starting point, both measures could be regarded as tough. The share price is €9.92, for instance. Take a step back, though, and remember that it was almost €19 two years ago before cancelled flights, strikes and quarrels with unions hurt the valuation. A boss shouldn’t require the whiff of an extraordinary payday to address those challenges.

Then there is the cost of fuel, a factor entirely outside O’Leary’s control but one that can turn a good year for an airline into an excellent one, which may be all he needs to clear the profit hurdle just once.

So, yes, a “bet” is the right way to think of the scheme. O’Leary was bored, was thinking of retiring and wanted something to persuade him to sign up for another five-year stint. Since he’s a very rich man who can swallow a token halving of his regular salary to €500,000, the sums had to be enormous to be interesting.

But here’s the rub in any “all or nothing” gamble designed to lock in the boss for five years. What will happen if, in years four or five, the targets look out of reach, again for reasons beyond O’Leary’s control? Heads, he wins; tails, he’ll probably take an early flight out.

Next better placed than other retailers for Brexit

Some companies are clearly better prepared for a no-deal Brexit than others. One is Next, which probably has nothing to do with the fact that its chief executive, Lord Wolfson, was a prominent Vote Leave supporter. Rather, the clothing chain prides itself on its future-proofing, which is why it is streets ahead of rivals in online shopping.

And here it is, an 11-page Brexit impact analysis, an update on last year’s version. What’s changed? Well, Next now expects a £25m saving from the government’s one-year temporary tariff regime. And it likes the “transitional simplified procedures” rules, saying they will “significantly reduce” the risk of gridlock at ports, which remains the company’s major worry.

This is a more cheerful tone than you’ll generally find in retail-land. A no-deal Brexit is “not our preferred” outcome, says Wolfson, but Next is “well prepared for this eventuality”. Should we calm down and take comfort that at least one major retailer thinks the government’s emergency measures have improved resilience?

Well, Next shareholders can probably relax a little but the mistake would be to draw too many wider lessons. Next is not a food retailer, so doesn’t have to worry about goods going off before they reach shelves. Most of its imports are from outside the EU. It is not running a just-in-time delivery system in the style of major car manufacturers.

And, as Wolfson himself pointed out, the government hasn’t said what tariffs would apply on imports from the EU after the temporary regime ends, a huge unknown. Nor did he offer any real insight into the possible whack to consumer confidence from a no-deal exit or the boost from a deal – it is merely an “important caveat” around this year’s sales and profits.

Still, Wolfson has done his job. He’s described Next’s preparations, applied numbers where he can and shown his methodology. It remains astonishing, or disgraceful, that other companies haven’t done the same. Their models might look more alarming – but investors still have the right to see the figures.