Investors attack BA chairman for staying on

Michael Harrison
Wednesday 17 July 2002 00:00
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Lord Marshall of Knightsbridge, the chairman of British Airways, came under attack from shareholders yesterday for deciding to stay on until he is 70 when the compulsory retirement age for pilots and cabin crew is 55.

BA's annual general meeting also heard criticisms of the airline's pension policy, levels of boardroom pay, the cut in commission payments to travel agents and the price it secured for selling the low-cost airline Go.

Outside the meeting, held at the Grosvenor House Hotel on London's Park Lane, there were four different protests taking place – over aircraft noise, pensions, union recognition and age discrimination.

Inside the meeting, the atmosphere was no less charged. One shareholder, who was a cabin services stewardess until she was forced to retire two months ago, asked Lord Marshall how BA could justify such age discrimination. "Is it one rule for board members and managers and another for the true ambassadors of BA, the pilots are cabin crew?" she demanded to know.

Earlier Lord Marshall had told the meeting: "A number of you believe that remuneration is too high; that the board is too old; and that some us should go." The observation was greeted with clapping although Lord Marshall said it was not clear which of the three was being applauded.

But he defended BA's standards of corporate governance saying that boardroom pay was only 59 per cent of the UK norm while the importance of age and experience should not be dismissed lightly. At this point he turned to BA's president emeritus, Lord King who is now 84.

Shareholders were not put off. One said the size of the board and its pay should be reduced to reflect the £200m loss BA reported last year, adding: "It looks like a gravy train to me. It is quite disgraceful and should be stopped."

But BA came in for the greatest criticism over the decision to end its final salary pension scheme for new employees. The scheme has 100,000 members and assets of £10bn.

Martin Shaw, an Airbus captain and representative of the pilots' union Balpa, warned the closure of the scheme could provoke industrial unrest and damage BA's share price. Another union representative, this time from the GMB union, said it would increase wage pressures within the airline and add to BA's recruitment and training costs.

But Lord Marshall refused to budge. BA would not reverse its decision to close the defined benefit scheme to new employees and it could not even give a guarantee that the entire scheme would not be scrapped. "I can't guarantee in blood that there won't be changes in the future. Ever and never are dangerous words to use," he added.

Rod Eddington, BA's chief executive, defended the £100m that BA raised when it sold Go to a management buyout even though easyJet has now agreed to pay three times that amount for the no-frills carrier.

Mr Eddington said it had taken BA and its advisers six months to find a buyer for Go. "We took the view that as we had put £25m into Go, £100m was not a bad result."

The main business of the meeting was to approve a scheme to create a new "special share" which will guarantee that BA remains under UK control even if the percentage of foreign shareholders rises above 50 per cent. At present it is 45 per cent.

Lord Marshall told shareholders that this would protect BA's international landing rights and route licences which were granted on the basis that it was a UK airline. The move is also expected to improve the liquidity of BA shares and trading in the stock.

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