Investors Attack Barclays Bonus Plans

Exclusive: Investors Attack Barclays' Bonus Plans

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Mark Kleinman

February 03, 2012 4:43 PM

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Barclays faces a shareholder backlash over plans to pay more than
£1bn in staff bonuses amid City concerns that it is failing to
rebalance the allocation of returns to employees and investors.
I’ve
learned that a meeting took place on Monday between Alison Carnwath,
the non-executive director who chairs Barclays’ remuneration committee,
and the Association of British Insurers (ABI), the body which represents
many of the biggest investors in the UK stock market.
People
familiar with the discussion tell me that ABI representatives at the
meeting expressed serious concern about the proposals and indicated that
they would require significant changes if the bank was to receive
support for its remuneration report at its annual meeting in the spring.
It’s
unclear whether Barclays has already modified its proposals since
Monday’s meeting. Yesterday Bloomberg reported that the bank would
reduce overall pay for staff at Barclays Capital, its investment bank,
by between 25 and 30 per cent.
The fact that Barclays has been
drawn into the debate underlines the extent to which shareholder
grievances over bank pay are being directed even at those lenders which
survived the financial crisis without the direct assistance of
taxpayers.
I’m also told that Barclays’ remuneration committee has
drawn up a proposal to pay Bob Diamond, Barclays’ chief executive, an
annual bonus of somewhere between £2m and £3m.
The pay committee
met yesterday to finalise its plans to pay bonuses and other financial
rewards to Barclays’ staff. The proposals will be discussed at a full
board meeting next Thursday, the day before it announces its full-year
results for 2011.
In December, the ABI wrote to the chairmen of
the UK banks’ remuneration committees to urge them to show restraint on
staff bonuses:
“Our members are concerned about the level of
returns that shareholders receive compared to the returns given to
employees. Members believe that in recent years this balance has been
inequitable, with too much value being delivered to employees in
contrast to the dividends paid to shareholders,” it said.
“The
reduction in employee pay-out ratios needs to be achieved by reducing
individual remuneration pay-outs to highly paid employees, including
executive directors, and not by just reducing employee numbers.”
Barclays
paid out about £670m in dividends to shareholders in 2010, according to
a spokeswoman for the bank, a number dwarfed by the bonuses it paid to
investment banking staff.
In regard to Diamond, it’s unclear
whether he plans to accept his bonus for 2011. It’s also worth saying
that the remuneration committee’s proposal will not automatically
translate into a full board decision. Last year, the pay committee at
Barclays proposed awarding Diamond a bonus of up to £9m before settling
on an award of £6.5m.
Diamond is entitled to an annual bonus of up
to £3.35m or 250 per cent of his £1.35m basic salary. He is also
eligible to be considered for a much larger long-term share award worth
up to £6.65m. Both elements of his variable pay are subject to deferral
and clawback.
Barclays and the ABI declined to comment.