Virgin Australia's board has been rebuked by an influential adviser to large investors for what it described as "high levels" of pay for chief executive John Borghetti.
With the airline to hold its annual meeting this month, CGI Glass Lewis has urged shareholders to vote against Virgin's remuneration report and the granting of share options to Mr Borghetti.
The rebuke by the proxy adviser will be largely symbolic because Virgin's four largest shareholders - Singapore Airlines, Etihad, Air New Zealand and British businessman Richard Branson - are likely to vote in favour of the resolutions. Their combined holdings amount to more than 70 per cent of the airline's register. For the third year in a row, CGI has urged a vote against the remuneration report because of a "lack of justification" for what it deems high levels of pay for Mr Borghetti.
His statutory pay was $3.7 million in a year in which Virgin slumped to a $98 million loss. The pay included a contractual bonus for the takeover of West Australian airline Skywest and the purchase of a controlling stake in Tigerair Australia. The board also decided to boost his base pay by $350,000 because Virgin's restructure was ahead of schedule.
CGI told clients Mr Borghetti's fixed pay was 70 per cent higher than the median for his counterparts at similar-sized companies and said it "views high fixed remuneration raises with scepticism". It said Virgin had fallen short in linking executive pay with its financial performance in two of the past three years.
The proxy adviser has also urged a vote against Virgin awarding 2.87 million share options to Mr Borghetti because of a lack of detail about the terms of the grant.
"We find it difficult to support this equity grant without clear disclosure of the corporate performance measures, weightings [and] vesting schedules," it said.
However, another proxy adviser, ISS, has recommended shareholders vote in favour of all the resolutions at the annual meeting, to be held in Brisbane on November 20.
ISS said it had concerns about a "substantial increase" in fixed pay for Mr Borghetti, and the payment of bonuses in a year of "poor financial performance". But it urged shareholders to support the executive pay card because Virgin had "recorded strong strategic victories in the past couple of years, which provides some justification for remunerating executives".