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April 19, 2012 3:33 pm
Bob Diamond, chief executive of Barclays, agreed to tougher conditions on his bonus and promised to increase dividends in the second victory for shareholders over global bankers’ pay in a week.
The concessions come a week before what is expected to be a fiery annual meeting at which some of Barclay’s biggest shareholders had vowed to oppose its multi-million pound executive pay scheme.
It follows within days of a shock vote at Citigroup in the US where 55 per cent of investors refused to back the $15m remuneration package for Vikram Pandit, chief executive.
The Citi defeat, said Patrick McGurn, general counsel at voting agency ISS, “was a wake-up call to all money-centre firms across the US, UK and Europe. Banks have redoubled efforts to engage their investors”.
Michael Garland, head of corporate governance for the office of the New York City Comptroller John Liu, said: “There has been an increase in shareholder engagement around compensation, but we’ll have to wait and see if this leads to better pay practices. Boards are now more responsive, fearing a vote on pay.”
Investors in Europe and the US have vowed to be more active and vote no to big payouts to executives at banks when profits and returns to shareholders have fallen. They are calling for tougher performance conditions on bonuses and incentive plans. This is against a backfrop of heightened political and regulatory pressure across Europe and the US for a more rigorous pay regimes banks and also on shareholders to call bank boards to account.
Barclays has come under fire from many of its largest investors, including Standard Life Investments, Fidelity, Scottish Widows Investment Partnership and F&C Asset Management, after it revealed that Mr Diamond’s take-home pay was £25m for last year, including a £5.75m payment to offset a tax liability while relocating from the US to the UK. Many had threatened to vote against the remuneration report and against directors on the remuneration committee at the meeting next Friday.
Yesterday Mr Diamond sought to head off an investor rebellion by pledging to forgo half of his £2.7m bonus for 2011 until Barclays has improved profitability.
The bank said it “recognised the strength of oppinion” after “extensive engagement with a number of major shareholders over the course of the past few weeks”.
In a further attempt to soothe investors, it promised to distribute a greater share of profits to shareholders: “The combination of higher earnings and a higher dividend payout ratio will allow a significant increase in the absolute level of dividends received by shareholders,” it said in a statement.
One of the shareholders that had indicated opposition to the pay package said on Thursday it would now back the plan. “We are pleased that our key concerns over last year’s executive bonuses have been addressed.” Guy Jubb, head of corporate governance at Standard Life, said.
Another investor said, however: “It will pacify some but others think the remuneration issues go far deeper”.
A third investor said the concession were limited, highlighting the Association of British Insurers concerns over the tax equalisation scheme for Mr Diamond.
The ABI recently pointed out that Mr Diamond himself described the bank’s performance in 2011 as “unacceptable” when it failed to reach targets for returns to shareholders
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