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Britain’s biggest cinema chain faces a backlash from shareholders over a plan that could see up to £ 208million of shares being awarded to key bosses while thousands of employees remain on leave as all of its 127 UK sites remain closed.
Cineworld shareholders are due to vote on a new compensation policy and long-term incentive plan (LTIP) at a special meeting next week. However, the Glass Lewis and ISS shareholder advisory groups have recommended investors vote against the plans.
Glass Lewis said the structure of the proposed LTIP, which would offer a block of shares spanning three years, meant executives appeared “eligible for virtually unlimited compensation.”
Cineworld’s 5,500 UK employees have been out of work since October, when the company shut down all of its sites indefinitely after announcing the postponement of the release of the next James Bond film until April. Cineworld staff have been on leave since November, although there has also been a significant round of voluntary and mandatory layoffs at various levels of management, from supervisors to cinema management.
The proposed LTIP will reward company executives if Cineworld’s share price rebounds to 1.90 pence within three years. If that level, which is near its pre-pandemic level of £ 1.97p, is reached, bosses will share £ 104million, with chief executive Mooky Greidinger and his brother and deputy, Israel, online for a reward. of £ 33m each.
However, if the share price hits the upper cap of £ 3.80, the executive directors will be awarded shares with a total value of £ 208million between them, with the two Greidinger brothers each receiving £ 65million. .
“On an annualized basis, the maximum payout under the plan reflects approximately 3,400% of the CEO’s base salary,” Glass Lewis told investors in a note. “This potential payout is excessive, far exceeding the maximum opportunity offered to UK peers.”
Cineworld shares are trading at 70 pence and have never reached a price of £ 3.80.
ISS noted that, given that the Greidinger family controls 20% of Cineworld, there was a question of whether there was “a real need to further encourage” the owners.
The proposed program, which will require the support of 50% of Cineworld’s investors to be implemented, pays in full in the event of a change of business owner.
In the ISS note, which was first reported by Sky News, the shareholder advisory group added that it was also “an exceptionally bad practice in the UK market that awards would automatically be acquired in the event of a change of control ”.
In November, Cineworld secured financial guarantees from lenders worth $ 750 million (£ 560 million) to deal with the coronavirus pandemic as long as it can reopen its theaters by May.
During the pandemic, executive directors voluntarily agreed to defer payment of their salaries and bonuses. “The fact that salaries have been reduced and bonuses are not being paid is unlikely to be considered a compelling reason for such a large aggregate award,” noted ISS.
Cineworld declined to comment.
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