Last updated: January 30, 2013 8:03 pm

MPs attack Barclays over bonus culture

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The letter "B" of the signage on the Barclays headquarters is hoisted up the side of the building in London©Reuters

An influential committee of MPs and peers accused Barclays of empty rhetoric on Wednesday, as it tore into the bank’s remuneration committee chairman and questioned the depth of its cultural reinvention.

Andrew Tyrie, who chairs the Parliamentary Commission on Banking Standards, described Sir John Sunderland’s defence of the generous bonuses awarded to former chief executive Bob Diamond as “unrepentant” and “absolutely extraordinary”.

Sir John had said he did not regard Mr Diamond’s £2.7m bonus award for 2011 as “a profound mistake”, insisting that the former chief executive had led the bank “with great energy, enthusiasm and skill” and that he “deserved some recognition”.

Mr Tyrie told the Financial Times after the hearing that Sir John’s evidence “reflects that there is a huge task ahead to change the culture at Barclays”.

The parliamentary commission is midway through a review of banks’ behaviour and has taken a particular interest in Barclays, following its £290m regulatory fine for manipulating the Libor benchmark borrowing rate. Mr Diamond, who resigned last summer in the wake of that affair, was one of the best-paid bankers in the City of London. His successor, Antony Jenkins, has gone out of his way to reinvent the bank’s image in a more ethical light.

Sir John would not be drawn on the level of bonus that would be awarded to Mr Jenkins, amid rumours of a £1m-plus payout for 2012. His contract suggests he could be paid up to £2m. Several members of the committee pointed out that unless there was a minimal bonus payout, Barclays’ claims to be reinventing its culture would ring hollow.

Challenged on the bank’s mis-selling of payment protection insurance, Sir John also appeared unapologetic, prompting an outburst from one committee member. “This is just rubbish,” Lord Turnbull said, in response to Sir John’s defence of PPI sales practices over 20 years.

Earlier, Sir John’s predecessor as head of Barclays’ remuneration committee had criticised the size of bankers’ bonuses, saying a culture of entitlement in the sector led to “obscene” levels of reward.

Alison Carnwath told the commission that Mr Diamond was reluctant to accept that pay was high, adding that he “thought he found loyalty in people around him by paying them a lot of money”.

“At Barclays the [remuneration] committee was aware that pay was at the top end of the scale and asked the chief executive on his appointment to take a leadership position and clarify the pay culture to staff,” Ms Carnwath said. “Mr Diamond was reluctant to do this and reluctant to accept pay at Barclays was high, particularly in the investment bank.”

Ms Carnwath resigned from her position on the remuneration committee last summer.

Earlier that year she had opposed Mr Diamond’s 2011 annual bonus, saying returns to shareholders had been poor and that Mr Diamond needed to set an example. However, she did ultimately support his award and generous payouts to other executives.

“[In] my view Barclays were demanding too much patience from their shareholders and were insufficiently sensitive to the political and economic environment and the hostile attitude to banks generally,” she wrote.

“I was alone in my view both on the committee which I chaired and on the board,” she said.

She acknowledged, however, that Mr Diamond had agreed that some staff were being rewarded too highly under previous plans and indicated he wished to remedy this. Shortly before he resigned, he agreed to cap some investment bankers’ annual total rewards, she said.

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