Cinema worker Julie Watt vividly remembers the night in October she discovered she might lose her job.
The latest James Bond film had just been postponed for the second time and her employer, Cineworld, had shut its 670 UK and US screens.
Ms Watt and her colleagues first heard that 5,500 UK employees’ jobs were at risk in a late breaking newspaper report, which was rapidly shared across Cineworld staff WhatsApp groups.
“None of us thought we would have any income for months,” said Ms Watt, who works front-of-house at one of Cineworld’s Scottish screens and leads an employee action group.
Cineworld put all its UK staff on indefinite unpaid leave only to change tack two weeks later when the government announced the furlough scheme would be extended into the new year.
Ms Watt has not returned to work since and several hundred cinema managers are now facing redundancy, she said.
The bleak outlook for staff, most of whom are on zero-hours contracts and earn 20p over the national minimum wage, has made it particularly hard for them to swallow investors’ decision to approve a bonus scheme that could pay Mooky Greidinger, Cineworld’s chief executive, and his brother and deputy, Israel, up to £65m of shares each.
The bonus scheme, which was approved by 70 per cent of Cineworld’s voting shareholders on Monday despite strong criticism from some big investors, has raised questions over wider governance issues at the 91-year-old family business, and shone a light on its top executives just as the pandemic ravages the industry.
It highlights a dilemma facing many companies across sectors closed by lockdowns: how to incentivise directors for the recovery when businesses remain in crisis mode.
The Greidingers’ family has run cinemas since Mooky and Israel’s grandfather bought the Ein Dor screen in Haifa, Israel in 1930. The Greidinger’s Cinema City International, which had since expanded into eastern Europe, became Cineworld after a £503m merger in 2014.
Mooky took the chief executive role in the enlarged company while Israel, known as the more practical of the two, became deputy. The pair live in neighbouring houses in Haifa, often conducting business in one or other of their homes.
“They finish each other’s sentences,” said Tim Richards, chief executive of cinema rival, Vue, who has known the brothers for many years.
Several investors and analysts have argued that this pedigree means the brothers are completely aligned with the company’s interests.
But others have questioned whether the unusual mix of public company and family business serves Cineworld’s wider stakeholders well. The Greidingers own 20 per cent of the business, while the remuneration committee chair was previously the group’s acting finance director.
“Once you have a shareholder with that amount of shares effectively they run the company,” said one former Cineworld executive. “They certainly have a veto and can stop things happening.”
A top 30 shareholder said they were “monitoring” Cineworld’s governance. “We will continue to hold them accountable through use of our voting rights . . . the ability of the independent non-executives to challenge is key in this context.”
The proposed bonus scheme offers the brothers stock awards based purely on increases in the company’s share price, from a minimum of £1.30 — the price at which Cineworld was trading before lockdowns started in March last year.
Investors who backed the scheme said it would keep the Greidingers closely incentivised by the share price after they were forced to sell around a third of their 28 per cent stake in Cineworld early in the crisis.
Tom Gosling, executive fellow at the Centre for Corporate Governance, noted that excluding the votes of the Greidinger’s holding company, Israel Theatres, the pay deal was still narrowly approved.
However several big shareholders deemed the potential payouts excessive.
One said the company was “using a particular low in the share price to line executives’ pockets when other stakeholders are suffering”. Another said the plan was not a surprise: “It is a board that has consistently been ignoring long-term shareholders’ expectations on appropriate executive compensation for many years.”
Mr Gosling said the board should only allow such a scheme if it is “genuinely good for the success and future of the business. Undoubtedly in the current environment companies need to be seen not to be tin eared on this front”.
Cineworld declined to comment on its governance and staff cuts.
The pandemic has been particularly brutal for leisure companies such as cinemas, and many of their staff. Unlike restaurants that have pivoted to delivery, cinemas have not been able to pull in any revenue during lockdowns.
Analysts at S&P have warned that global cinema attendance might not recover to 2019 levels “until 2022, if ever”, although early trends in Australia and China showed audiences had returned once Covid-19 rates eased.
Cineworld, which operates across 10 countries but makes 90 per cent of its revenues in the US and UK, came into the crisis with large amounts of debt as a result of pursuing two major acquisitions, and has borrowed more to fund monthly cash outflows of around £60m.
In September the previously profitable chain reported a $1.6bn loss for the first half. Two months later it came close to bankruptcy before agreeing a $750m financial restructuring with lenders.
Cineworld has improved its governance over the past year with the addition of a former Deloitte governance specialist to its board and the appointment of Alicja Kornasiewicz, a non-executive director since 2015, as chairman. Anthony Bloom, its previous chairman, had served for 23 years.
Jangho Group, the holding company of Chinese millionaire, Liu Zaiwang, has built up a 12 per cent stake in the business, fuelling speculation of a takeover.
Ms Watt believes cinemas will recover but that the crisis has made her think twice about working for Cineworld.
“For now, I’m still with [Cineworld] because it’s the only source of income I have,” she said. “Most people that work there would tell you it’s not the greatest place to work.”
Additional reporting by Attracta Mooney and Robert Smith