Smurfit Kappa has been criticised for paying out hefty management bonuses that are benchmarked against health and safety targets, despite two fatal accidents in the business.
The packaging giant’s corporate pay culture has come in for criticism ahead of its annual general meeting (AGM) in Dublin tomorrow.
An influential shareholder advisory firm questioned the decision to pay out bonuses linked to health and safety targets in light of the two fatal workplace accidents in separate incidents.
Institutional Shareholder Services (ISS), a proxy advisory firm to some of the largest fund managers in the world, described the decision as “incongruous” and said it was “open to question whether such an outcome is appropriate where lives have been lost”.
The tragic deaths were acknowledged in Smurfit Kappa’s annual report by CEO Tony Smurfit.
“The safety of every member of the workforce is a key consideration for the group,” he wrote.
The annual report states that the company had suffered its “lowest ever level of Lost Time Accident frequency in our recent history” in 2017.
It plans to move to measuring its safety record using what the company called a more sophisticated Total Recordable Injuries Rate.
ISS, in a report prepared for clients ahead of the AGM, highlighted that 10pc of Smurfit’s bonus pool is linked to health and safety measures and noted that three-quarters of that element was paid to senior staff. But it argued a payout “would appear inappropriate in a year when two fatalities occurred”.
ISS emphasised it is not within its “report’s remit to consider how the loss of life should be reflected in remuneration but it is unusual and it does not sit easily that bonuses should be received for health and safety targets in the context of fatalities”.
The circumstances that led to the employees’ deaths are set out in the Dublin-based group’s annual report and show one worker died operating machinery at Smurfit’s Elcorr manufacturing plant in the Netherlands while another employee at the forestry division in Venezuela sustained a fatal injury after a tree he was cutting “collapsed on him”.
CEO Tony Smurfit, who received €2.48m pay package last year, a 2.5pc increase on his total remuneration in 2016, referenced the deaths a number of times in his review of the year in the annual report, stressing the “prevention of every accident is and will remain a key priority for the group”.
He also highlighted, however, that Smurfit’s health and safety “performance improved again in 2017” and said accident and safety frequency targets had fallen by 10pc to a record low.
ISS acknowledged the portion of the executive bonus scheme linked to health and safety is small, but argued that “it is noteworthy that there was any payment at all” against these measures.
Another corporate governance adviser, London-based Pensions and Investment Research Consultants (Pirc) has urged shareholders to vote against the group’s pay plans, calling them excessive.
Criticism of the family-run company’s bonus culture comes as a number of investors pressure the board to engage with its twice-rebuffed suitor, International Paper, a bid likely to dominate the agenda at tomorrow’s shareholder meeting.