TUI AG: Board view deviations from UK governance practice as necessary

TUI AG holds its 2019 AGM on 12 February and shareholders will note deviations from certain UK good governance practices. This is due to TUI having a primary listing on both the German Stock Exchange and the London Stock Exchange. TUI states that while in many respects the requirements of the German and UK corporate governance codes are similar, there are certain aspects which are not compatible, in some cases due to different legal regimes. As such the TUI Board view some deviations from UK practice as necessary.

One example is seen in the board structure. TUI operates a dual-board structure, consisting of an executive board and a supervisory board, instead of a unitary board structure. The supervisory board is comprised of 20 members, 10 employee representatives, and 10 shareholder representatives. Three of the shareholder representatives are considered non-independent including deputy chair Peter Long, due to his prior CEO role, and remuneration committee member Alexey Mordashov, due to his links with major shareholder Unifirm Ltd. The UK Code recommends for directors to stand for election annually, however, the only director standing at the AGM is newly appointed non-independent supervisory board member Trian Riu who is set be appointed on a five-year-term. Instead of annual elections, TUI voluntarily puts forward individual resolutions approving the actions of each executive and supervisory board member in the year under review.

Although there is no resolution to approve the remuneration report for the year on the AGM agenda, as is customary in the UK market, shareholders will vote on the remuneration policy for the executive board. Minerva’s research report identified various issues with the company’s remuneration practices, particularly when coming from a UK perspective. Some of the concerns include no clawback provisions or shareholding requirements, poor disclosure of performance targets applicable to variable pay, and excessive pension and termination provisions. The supervisory board have not made any material changes to the policy and last year its approval received around 10% shareholder dissent.

TUI is set to face questions over its sale of tickets to SeaWorld at its AGM after PETA US announced it had become a shareholder in the Company in order to send representatives to the AGM. PETA has been campaigning against an alleged history of orca deaths at the marine park and as a result of pressure from PETA Thomas Cook Group plc announced it would stop selling tickets in June 2018.

Governance Issues at AGMs