Smith, who had offered a cut in March in response to the coronavirus crisis, said in a statement that the cut “includes losing my short-term variable annual compensation”.
The move follows an uproar in the Netherlands over new performance criteria that seemed to reward the CEO for attracting state aid – prompting Dutch finance minister Wopke Hoekstra to publicly demand the removal of his premium.
“Bonuses in these times of crisis are reckless and incompatible with support funded by taxpayers’ money,” Hoekstra told the Dutch newspaper De Telegraaf.
US airline bosses also agreed to pay cuts as they pursued a multi-billion dollar aid package for the sector – which ended up imposing strict limits on their total compensation.
In a separate announcement Thursday, KLM boss Pieter Elbers said he would take a 20% pay cut for the rest of the year and also lost his bonus.
Air France-KLM is moving towards a rescue agreement worth around 10 billion euros ($ 10.8 billion) in which the Dutch government would guarantee about 2 billion loans to KLM, sources said .
The group’s president, Anne-Marie Couderc, told French senators on Wednesday that discussions on a combination of state guarantees and direct loans to Air France should be concluded “in the coming days”, while an agreement on Dutch support for KLM could take longer.
As the coronavirus shutdown approached in March, CEO Smith had agreed to reduce his base salary by 900,000 euros and his bonus up to 1.35 million euros in proportion to the loss of income of staff on leave – generally about 25% during the layoff period.
But proposals made to shareholders last week showed that Smith’s variable compensation criteria had been changed to exclude debt reduction, while introducing new conditions, including retaining cash and “obtaining support and funding ”.
“I would like to underscore and repeat the commitment I made on March 16, 2020 to cut my pay by 25% during the COVID-19 crisis,” said Smith on Thursday.
“In the context of the very difficult period that the Air France-KLM group is currently going through, this reduction clearly includes the loss of my annual short-term variable compensation (” bonus “) for fiscal year 2020 as well.”
The lost compensation leaves intact the group CEO’s long-term incentive plan, worth an additional € 2 million per year and paid after three years.
Report by Bart Meijer in Amsterdam and Laurence Frost in Paris; Additional reports by Tracy Rucinski in Chicago and Anthony Deutsch in Amsterdam; Editing by Susan Fenton and Pritha Sarkar
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