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Barclays' former pay chief argued for Bob Diamond to get no bonus Barclays' former pay chief argued for Bob Diamond to get no bonus
(about 3 hours later)
Alison Carnwath, Barclays' former pay chair, has revealed she was a lone voice on the bank's board in recommending the bank's former boss Bob Diamond receive "zero" bonus in 2011. Alison Carnwath, who used to be responsible for setting pay at Barclays, shed light on divisions on the bank's board last year when she claimed to have been a lone voice in recommending former boss Bob Diamond receive "zero" bonus.
In written evidence before the banking standards commission, Carnwath said Diamond was reluctant to accept pay at the bank was high and was overly protective of the investment bank arm he headed before taking charge of the whole bank. Diamond left left days after the £290m fine for rigging Libor. But her successor as chairman of the Barclays remuneration committee, Sir John Sunderland, stunned the banking standards commission when he said that he continued to believe that Diamond – who left last July just days after the bank was fined £290m for rigging Libor – should have been awarded "a form of incentive compensation" .
Carnwath said her view was Diamond should have set an example by not taking a bonus of £2.7m recommended by the former chairman Marcus Agius – because of the political environment and poor returns of the banks. Carnwath told MPs she thought bankers' pay had reached "obscene" levels in some circumstances. Sunderland, who is in talks with shareholders about a bonus for Diamond's successor Antony Jenkins, conceded that with hindsight he would have "debated the quantum" of the bonus to Diamond, but not the principle of awarding one.
She told the committee, chaired by conservative MP Andrew Tyrie, that she was "amazed" by Agius' recommendation. In her written evidence, she said: "My determination was quite straightforward, return to shareholders had been poor and Mr Diamond needed to set an example to all stakeholders that remuneration policies had to change to reflect the low return environment". Diamond was handed a £2.7m bonus for 2011 and a total of £17m before the bank picked up his tax bill of £5.7m.
The chairman of property company British Land, Carnwath herself quit the board less than a month after the fine was announced in June and after she received a protest vote about the bank's pay policies at the annual meeting in the spring. Carnwath said Diamond – who she said was known for his "generous pay packet" – was reluctant to accept pay at the bank was high and was overly protective of the investment banking arm he headed before stepping up to chief executive.
She was the chair of the remuneration committee which set the pay of Diamond and other executives at Barclays and said she felt the former boss should not have had a bonus because the bank's returns to shareholders — measured as return on equity, or ROE — were not good enough. Carnwath quit by the end of July, just weeks after Diamond, and in the aftermath of a rebellion against her re-election to the board at the annual meeting in April.
"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. She had been unable to attend the crucial board meeting last February when Diamond's pay was rubber stamped and at which, the bank insists, the decision over the bonus was unanimous.
"Barclays returns in 2011 were not good from a shareholder's perspective with the key measure of ROE (and substantially lower leverage) not covering the cost of capital and the share price and dividends showing poor returns. It was for this reason that I disagreed with the board chairman's recommendation on Mr Diamond's annual bonus for 2011," she added. Carnwath, chairman of Land Securities, described pay at banks in some instances as "obscene". She said in written evidence that Diamond should have set an example by not taking the bonus recommended by the former chairman Marcus Agius.
" I recommended zero. I was alone in my view both on the committee which I chaired and on the board," she said. Carnwath told MPs and peers on the commission she thought a "culture of entitlement" had emerged over bankers' bonuses and that she had been "amazed" by Agius' recommendation, given the performance of the bank and political atmosphere. In her written evidence, she said: "Barclays' returns in 2011 were not good from a shareholder's perspective with the key measure of [return on equity] ... not covering the cost of capital and the share price and dividends showing poor returns. It was for this reason that I disagreed with the board chairman's recommendation on Mr Diamond's annual bonus for 2011."
She said the remuneration committee was " aware that pay was at the top end of the scale" and had asked Diamond "to take a leadership position and clarify the pay culture to staff". She added: "I recommended zero. I was alone in my view both on the committee which I chaired and on the board."
"Mr Diamond was reluctant to do this and reluctant to accept pay at Barclays was high particularly in the investment bank," she said. She said the remuneration committee was "aware that pay was at the top end of the scale" and had asked Diamond "to take a leadership position and clarify the pay culture to staff".
Agius — who also quit in the wake of the Libor scandal and has been replaced by Sir David Walker — had agreed the "tax equalisation" bill with Diamond which resulted in a £5.7m bill for the bank. Diamond took home £17m in 2011 before the tax payment. Sunderland rebutted claims that the Barclays' structured capital markets division – best known for its tax avoidance schemes – had in one year generated 110% of the bank profits. A member of the Barclays board since 2005, his defence of payment protection insurance — the industry's biggest ever mis-selling scandal — was described as "rubbish" by commission member Lord Turnbull.
At the bank's annual meeting some 22.5% of investors failing tosupport her because of her status as chairman of the remuneration committee. Carnwath said that Diamond "thought he found loyalty in people around him by paying them well, in my view more than he needed to".
Her successor as chair of the remuneration committee, Sir John Sunderland, is also due to give evidence. Separately, HSBC set up a new boardroom committee charged with cracking down on financial crime following its £1.2bn fine for money laundering. Among its members are former tax inspector Dave Hartnett.