Thomas Cook and EMI having bonus trouble

A word of advice to companies with big incentive schemes: make sure you can afford them before you make any promises...

by Emma Haslett
Last Updated: 21 Sep 2012
Could this be the beginning of the end for the mega-bonus? It turns out Thomas Cook had to ask its former CEO to wait for most of the £1.2m payoff it had agreed to give him. According to its annual report, the tour operator, which issued a series of profit warnings last year, asked Manny Fontenla-Novoa (who resigned in August but continued to be paid until the beginning of November) to wait for the £851,000 it was supposed to pay him in November, until the group was in a better position, cash-wise. That’s got to be worrying for shareholders – but at least Thomas Cook can take solace in the fact it’s not the only one having trouble paying its (ex) employees.

The release of the annual report coincided with an announcement that three of Thomas Cook’s non-executive directors were also leaving: Bo Lerenius and Peter Middleton have both left after new chairman Frank Meysman vowed to ‘refresh the board’ when he took over last month. A third, David Allvey, is also leaving – although that’s more likely to be because he’s been in the position for nine years, the full term corporate governance rules recommends a NED serve.

Still – in the absence of a full-time CEO, the pressure’s on Meysman to sort out the company, which issued four profit warnings last year and made a loss of £400m. Although holding off on Fontenla-Novoa’s payment has probably helped its cashflow situation, the board has come under pressure from shareholders to withhold the money altogether (although interim CEO Sam Weihagen said last month that Thomas Cook doesn’t have ‘the mechanism to do a clawback’ – which probably means 'we'd be sued if we didn't pay up'). So there’s plenty more to be done.

Still – at least Fontenla-Novoa will eventually see his money, which is more than can be said for executives at EMI, where it has emerged £41m worth of bonus schemes were cancelled when the record company went into administration last year. According to filings made with Companies House, CEO Roger Faxon and co had signed up to three generous incentive schemes, which were promptly cancelled when the group went into administration – before so much as a penny had been paid out. That’s got to smart a bit, but then the company was hardly in the rudest of health at the time, so any payment would have been the ultimate reward for failure.

Still: at least its finances are looking a little better now. Figures showed that the group’s ebitda (earnings before interest, tax depreciation and amortisation) fell to £306m from £333m in 2010 – but that’s still higher than £298m in 2009, which is a relief. Crucially, losses (including write-downs on the value of assets) also fell, to £324m, from £487m in 2010 – way less than the £1bn it lost in 2009. Although it also reported that Katy Perry’s Teenage Dream was its biggest-selling album. Which doesn’t bode well for the future of the music industry in the slightest….

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