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| Barclays chief Bob Diamond links part of bonus to improved performance | Barclays chief Bob Diamond links part of bonus to improved performance |
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| Barclays scrambled to head off a damaging revolt over the £17m pay package of its chief executive Bob Diamond on Thursday by changing the terms of last year's bonus just eight days before a crucial shareholder vote. | |
| In an unscheduled announcement to the stock market demonstrating the level of anxiety about the scale of the potential shareholder rebellion at the annual meeting a week on Friday, the bank also pledged to bolster its dividends to try to address investors' concerns that it paid £2.1bn in bonuses last year – more than three times the £700m used to pay shareholders' dividends. | |
| The surprise move came after the bank earlier this week had embarked on urgent canvassing of major investors asking them what could be done to limit the level of dissent sparked by a £2.7m bonus for Diamond for 2011. There was also anger over the decision to pay a £5.7m tax bill he incurred when moving back to the UK from the US to become chief executive after more than a decade running the investment bank Barclays Capital. | The surprise move came after the bank earlier this week had embarked on urgent canvassing of major investors asking them what could be done to limit the level of dissent sparked by a £2.7m bonus for Diamond for 2011. There was also anger over the decision to pay a £5.7m tax bill he incurred when moving back to the UK from the US to become chief executive after more than a decade running the investment bank Barclays Capital. |
| The bank is now more closely linking Diamond's bonus to a measure of financial performance known as return-on-equity, which is the bank's net income after tax divided by shareholder equity. Diamond's return-on-equity target is 13% – well above the 6.6% reported for 2011, a figure he described as "unacceptable". | The bank is now more closely linking Diamond's bonus to a measure of financial performance known as return-on-equity, which is the bank's net income after tax divided by shareholder equity. Diamond's return-on-equity target is 13% – well above the 6.6% reported for 2011, a figure he described as "unacceptable". |
| Diamond will have half of his £2.7m share award for 2011 linked to the return on equity in three years' time. Only if the bank's return on equity is greater than its cost of equity (11.5%) will he take that half of the bonus. The same will apply to the £1.8m bonus awarded to finance director Chris Lucas. Until now, neither bonus had any performance criteria attached and would have been released, in shares, to both directors in three years' time. | Diamond will have half of his £2.7m share award for 2011 linked to the return on equity in three years' time. Only if the bank's return on equity is greater than its cost of equity (11.5%) will he take that half of the bonus. The same will apply to the £1.8m bonus awarded to finance director Chris Lucas. Until now, neither bonus had any performance criteria attached and would have been released, in shares, to both directors in three years' time. |
| The bank immediately won round Standard Life, which owns 2% of the shares. Guy Jubb, head of corporate governance, said: "We now intend to support the remuneration report at next week's AGM." | The bank immediately won round Standard Life, which owns 2% of the shares. Guy Jubb, head of corporate governance, said: "We now intend to support the remuneration report at next week's AGM." |
| However, it was far from clear that other investors had been convinced so easily and Barclays could face a tense week while shareholders lodge their votes not only for the remuneration report but also for the re-election of Alison Carnwath, the non-executive who chairs the remuneration committee. "Some are tempted to shift but most are not," one shareholder said. "It's a bit late to be doing this if the company thinks this is such a good idea and also it does not address the fundamental issues on pay." | However, it was far from clear that other investors had been convinced so easily and Barclays could face a tense week while shareholders lodge their votes not only for the remuneration report but also for the re-election of Alison Carnwath, the non-executive who chairs the remuneration committee. "Some are tempted to shift but most are not," one shareholder said. "It's a bit late to be doing this if the company thinks this is such a good idea and also it does not address the fundamental issues on pay." |
| Advisory body Pirc kept its recommendation to vote against the remunerartion report and Carnwath, arguing there should have been no bonus at all given the bank's performance. David Paterson, head of corporate governance at the influential National Association of Pension Funds, said it was a "positive step" but called on Barclays to "engage with shareholders after the AGM in order to address the fundamental concerns which many have about the structure of executive pay". | Advisory body Pirc kept its recommendation to vote against the remunerartion report and Carnwath, arguing there should have been no bonus at all given the bank's performance. David Paterson, head of corporate governance at the influential National Association of Pension Funds, said it was a "positive step" but called on Barclays to "engage with shareholders after the AGM in order to address the fundamental concerns which many have about the structure of executive pay". |
| The Association of British Insurers, whose members control a fifth of the stock market, declined to comment on the changes. Last week it issued an amber top alert, highlighting its concerns about the bonuses of Diamond and Lucas. The ABI had previously pointed out that it was "business as usual" at the bank as the amount of revenues it had used to fund bonuses at Barclays Capital had remained static at 35% even though the bank had insisted bonuses were down 25% on the year. | The Association of British Insurers, whose members control a fifth of the stock market, declined to comment on the changes. Last week it issued an amber top alert, highlighting its concerns about the bonuses of Diamond and Lucas. The ABI had previously pointed out that it was "business as usual" at the bank as the amount of revenues it had used to fund bonuses at Barclays Capital had remained static at 35% even though the bank had insisted bonuses were down 25% on the year. |
| The bank appeared to attempt to address this, saying it that it was "fully committed to ensuring that a greater proportion of income and profits flow to shareholders notwithstanding that it operates within the constraints of a competitive market". | The bank appeared to attempt to address this, saying it that it was "fully committed to ensuring that a greater proportion of income and profits flow to shareholders notwithstanding that it operates within the constraints of a competitive market". |
| Barclays added that it had made no changes to the tax arrangements. | Barclays added that it had made no changes to the tax arrangements. |
| Lib Dem peer Lord Oakeshott said: "This shouldn't be enough to let them off the hook. What really sticks in the throat of taxpayers and investors is the blank cheque to cover his tax bill." | Lib Dem peer Lord Oakeshott said: "This shouldn't be enough to let them off the hook. What really sticks in the throat of taxpayers and investors is the blank cheque to cover his tax bill." |
| The changes followed week of shareholder meetings led by chairman Marcus Agius and were "recognising the strength of opinion expressed by some shareholders, via those meetings, and the executive directors' confidence in the future performance of the bank", Barclays said. | The changes followed week of shareholder meetings led by chairman Marcus Agius and were "recognising the strength of opinion expressed by some shareholders, via those meetings, and the executive directors' confidence in the future performance of the bank", Barclays said. |
| Sticking to its target for a 13% return on equity, the bank said: "Achieving this target of 13% return on equity will allow the portion of post-tax profits that are distributed as dividends to normalise at a level much higher than today, and Barclays intends to continue to make steady progress towards that as the return on equity improves. 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". | Sticking to its target for a 13% return on equity, the bank said: "Achieving this target of 13% return on equity will allow the portion of post-tax profits that are distributed as dividends to normalise at a level much higher than today, and Barclays intends to continue to make steady progress towards that as the return on equity improves. 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". |