Lloyds Banking Group has been ordered by a judge to award shares worth £1.35m to Eric Daniels, who ran the lender when it was rescued by UK taxpayers, after he won a court battle that his bonus had been withheld unlawfully.
A High Court judge also ordered Lloyds to pay shares worth £933,230 to Truett Tate, the lender’s former head of wholesale banking. The two men claimed that they should have been paid the share awards in 2012 after hitting targets linked to the acquisition of rival HBOS.
Mr Daniels, who left the bank in 2011 with a £5m pension pot, was responsible for orchestrating the takeover of HBOS in a deal that left Lloyds nursing heavy losses and needing a government bailout.
Tuesday’s ruling is a blow for Lloyds, which for six years has resisted paying the bonuses to the two executives, because they were likely to be seen as a reward for failure because of the disastrous outcome of the HBOS deal.
The summary judgment will be closely analysed by the financial sector as a sign of how the courts view attempts by bankers to enforce their contractual rights in the light of tighter regulations that allow banks to withhold or clawback remuneration because of failings.
Barristers for Mr Daniels at 20 Essex Street law firm celebrated “an emphatic vindication” of his position “that will have general relevance beyond the facts of this particular case to the construction of contractual share schemes awarded to employee participants, unilateral powers of variation and settlement agreements”.
Lloyds said: “We accept the court’s decision and now consider this matter closed.”
The judge ordered the bank to pay Mr Daniels 2,063,640 shares and Mr Tate 1,424,778 shares, plus legal costs and any dividends they would have earned since 2012 with subsequent interest, within 14 days.
The court judgment cited a conversation in February 2012 in which Mr Daniels was told by Sir Win Bischoff, the then chairman of Lloyds, that “if he did not agree to waive the award, the board would not agree to pay him”.
The contested award related to a 2009 share-based long-term incentive plan that was conditional on the progress of integrating HBOS, including achieving at least £1.5bn of cost savings — a target the bank hit in 2011.
Mr Daniels, who now works at Stormharbour, a boutique investment bank in the City, supported his claim with minutes from a meeting of Lloyds’ remuneration committee in January 2012 showing that it was agreed that the 2009 awards should vest in full.
The remuneration committee went on to approve and adopt an amended version of the plan in February 2012 that included a rule giving it general powers to adjust an award downwards if the performance of any party justified an amendment.
Lloyds decided to award the HBOS integration bonus to only some executives and not others. It also blocked payouts to Helen Weir, former head of retail, and Archie Kane, the ex-head of its insurance arm. But those two executives have not made claims against the bank and it may now be too late for them to do so.
The UK government had to take a 43 per cent stake in Lloyds in 2009 and sold out fully only last year, recouping a slight profit on the £20.3bn it injected to save the bank. The UK government’s stake was managed by UK Financial Investments (UKFI).
The judgment cited notes from a Lloyds remuneration committee meeting stating: “Pending further consultation . . . it was agreed that the decision reached by the committee on 24 January 2012 regarding the vesting of the Integration LTIP following discussion with UKFI should be deferred”.
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