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Governance

Ryanair chairman re-elected despite pension fund opposition

Ryanair Chairman David Bonderman will remain in his position following an annual general meeting Thursday, despite opposition from nearly a third of investors.

Almost 30% of investors voted against the chairman of the Irish airline due to concerns over his independence.

The Local Authority Pension Fund Forum, which represents 79 local authority U.K. pension funds with a combined 230 billion ($300.5 billion) in assets and makes proxy votes on their behalf, voted against Mr. Bonderman citing failed oversight of human capital and customer services management, as well as lack of progress toward electing more independent board directors. Only 25% of Ryanair's directors are considered independent, LAPFF said.

"Based on the mood of the meeting we would expect Ryanair to announce plans for Mr. Bonderman to step down in due course. Ryanair should recruit an independent chairman who will strengthen the board, work closely with and provide the right level of challenge to (CEO Micheal) O'Leary," said Paul Doughty, councillor and LAPFF executive member who attended the meeting, in an emailed comment.

Mr. Bonderman is a non-executive chairman and shareholder in Ryanair through 1996 Air G.P. Inc., which owns a minority interest in the airline.

Ashley Hamilton Claxton, head of responsible investment at another investor in the airline, Royal London Asset Management, said in a separate comment Wednesday ahead of the vote that "While we recognize that Ryanair has taken some steps toward improving the level of independence in its boardroom in the last year, this has not sufficiently mitigated our overall negative view of governance and oversight at the company. We will continue to vote against the chairman, the senior independent director and the chairman of the audit committee at their upcoming AGM."

However, Alison Kennedy, investment director at Aberdeen Standard Investments, said: "We have voted our clients' shares in favor of all resolutions, including those to re-elect the chair, Mr. Bonderman."

Over a third of investors also voted against re-election of non-executive director Kyran McLaughlin, according to Ryanair's annual general meeting resolutions.

KPMG Makinson Cowell said in a report earlier this year on resolutions to reappoint directors that only nine directors of FTSE 100 companies received less than 80% support in 2017, compared to only four such instances in 2016. "Generally accepted practice is that less than 80% support for a particular resolution would typically constitute a significant level of shareholder dissent and this is the threshold applied in this review," the report said.

Aberdeen Standard's Ms. Kennedy said: "The length of time (Messrs. Bonderman and McLaughlin) have been on the board suggests a lack of focus on board succession planning; excessive tenure also calls into question an individual's independence and objectivity; and our engagement on governance matters suggests that the board is not listening carefully enough to shareholders' views. However, we were aware of the danger of unintended consequences should these two individuals be voted off the board at this time, particularly as none of the other non-executive directors has served for more than five years."

"We expect that there will be clear progress on succession for these two key board positions by the time of the AGM next year. If not, others things being equal, we will vote against the re-election of Mr. Bonderman, Mr. McLaughlin and the other members of the nominations committee," Ms. Kennedy added.