Wizz Air will hand its chief executive Jozsef Varadi a £100m bonus if he can rapidly grow the low-cost airline as it emerges from the pandemic, setting up one of the biggest ever payouts from a London-listed company.
Varadi will need to more than double Wizz’s share price from £48 to £120 over the next five years to hit the one-off award, which would be paid in shares over a four-year period, according to documents sent to shareholders ahead of the company’s annual meeting and seen by the EuroJournal.
The potential windfall underlines Wizz’s aggressive expansion plans across Europe, as well as its reliance on Varadi to execute them.
It would also leave the Hungarian better paid than almost all his peers in the European airline industry, including Ryanair boss Michael O’Leary, who signed a contract in 2019, which included a €99m payout from stock options, dependent on the airline’s share price or profitability over five years.
Other big payouts in the UK include Bet365’s £421m package for Denise Coates for the year to the end of March 2020, which made the founder of the private gambling company the best-paid executive in the country.
Tim Steiner, chief executive of Ocado, ranked as the highest paid chief executive of a FTSE 100 company in 2019, taking home £58.7m.
He is expected to receive up to £100m over five years if shares continue to rise, despite a shareholder backlash when the scheme was introduced in 2019.
And earlier this year, Cineworld was hit with a revolt by shareholders over a proposed bonus scheme that would pay out up to £65m to its chief executive Mooky Greidinger.
Varadi, who was one of the airline’s founders in 2003, has grown it into one of the most significant players in European aviation thanks to cheap fares made possible by an ultra-low cost business model.
The board was aware of at least three other job offers Varadi has received, a person familiar with the matter said, underlining their desire to hang on to him at almost any cost.
The £100m is the maximum Varadi can be paid if the share price increases at a compound annual growth rate of 20 per cent over the five years. Anything between a 10 and 20 per cent growth rate will lead to him being paid between £20m and £100m, depending on share price performance. Varadi will also need to hit an emissions and gender diversity target.
In a letter to shareholders ahead of the annual meeting, the chair of Wizz’s remuneration committee Barry Eccleston said the payout was needed to ensure Varadi committed his future to the Hungarian-based airline.
Varadi’s contract ran out at the end of last year, and was extended while a new offer was drawn up. He has taken a pay cut during the pandemic, with a €1.97m salary this year.
Wizz’s board met investors representing about half of the company’s shares to discuss the bonus, and subsequently beefed up the performance target.
Shareholders will need to back the package at the annual meeting on July 27, which also includes a £50m bonus pool for other senior leadership, and smaller bonuses for all staff including cabin crew, whose comparatively low wages have helped make Wizz Air so competitive.
During discussions, “a few shareholders” felt Varadi’s offer was too high “relative to the UK market at this point in time,” but the majority backed the focus on retaining him, Eccleston wrote.
The starting point for the bonus period comes as Wizz’s shares are close to an all-time high even as the pandemic caused disruption across the industry.
Wizz is confident it can emerge as a long-term winner, and has pledged to move into new markets as rivals retrench. Analysts are also bullish on the company’s prospects.
In recent years, UK shareholders and politicians have become increasingly outspoken about chief executives’ pay. In 2018, the bonus for Jeff Fairburn, then chief executive of housebuilder Persimmon, was slashed from £110m to £75m after an outcry.
In 2019, MPs called for the introduction of a cap on total remuneration to avoid huge payouts, warning that soaring packages were a symbol of “corporate greed”.
Some shareholders have begun taking a tougher stance on big pay packages, underlined by this year’s pay revolt at Cineworld.
They argue they are often out of kilter with the experience of the wider workforce and other stakeholders, although other big investors say large bonuses can be justified by strong performance.