Bank shareholders have claimed another scalp. Earlier this week, over half of Citigroup’s shareholders voted against the U.S. bank’s executive pay plan. Now Barclays, which was facing a similar uprising at its annual general meeting next week, has moved to avoid such a chastening outcome.
Investors were clearly hopping mad about Barclays’ decision to award chief executive Bob Diamond a £2.7-million ($4.3-million) bonus – 80 per cent of the maximum – for 2011. The bank’s peace offering noted the “strength of opinion” among shareholders. No doubt Citi’s humbling experience concentrated its mind.
Yet as olive branches go, the one extended by Mr. Diamond and Chris Lucas, the finance director, is rather limp. Both will forfeit half their 2011 bonus unless Barclays lifts its return on equity – which was a lowly 6.6 per cent last year – above its 11.5 per cent cost of equity. However, the two men effectively have three and a half years to hit the target. And investors will rightly ask why the other half of the payout is not subject to the same condition.
Some shareholders will welcome the fact that Barclays is showing signs of listening. But the climb down is only partial: Investors were also concerned about the lack of forewarning given about a £5.7-million tax equalization payment Barclays made to Mr. Diamond when he became a U.K. taxpayer.
The bank’s U-turn also raises another question: Why didn’t Barclays’ remuneration committee, headed by banker Alison Carnwath and including chairman Marcus Agius, take a tougher line after a performance that Mr. Diamond himself described as “unacceptable,” and after two of his U.K. rivals waived their annual payout?
Barclays’ last-minute concessions could well head off a Citigroup-style defeat. But it has done little to assuage shareholders’ longer-term dissatisfaction.