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April 26, 2012

Will Barclays Set A Precedent For Shareholders Curbing Bankers' Bonuses?

By Spear's

Regardless of the result tomorrow, the age of unchallenged bonuses to bank bosses looks certain to be over ’ the influence and power of shareholders can no longer be ignored.

Tomorrow could well be a decisive day in Barclays’ relationship with its shareholders, as well as potentially set a new precedent for shareholders’ say on banks’ approach to payouts.

The Local Authority Pension Fund Forum (LAPFF) has issued a voting alert to its members, urging them to reject Barclays Chief Executive Bob Diamond’s £17.7 million pay deal for 2011 – a combination of salary, bonus and share awards. The LAPFF’s chairman, Councillor Ian Greenwood said that this extraordinary intervention comes as a result of an ‘unprecedented level of interest from our members in the remuneration policy at Barclays this year.’ Simon Walker, director general of the Institute of Directors, has gone further claiming that bonuses at the London-based bank were too high and that the bank is ‘out of order’.

Justifying Diamond’s potential pay packet has become increasingly difficult given Barclays’ poor performance, with net profits for 2011 falling 15.6 per cent to £3bn. Seemingly recognising some of the investors’ outrage, Diamond and finance director Chris Lucas have accepted a condition on their bonuses which will see 50 per cent not paid in full until Barclays’ return on equity exceeds its cost of equity. But is this concession enough?

Greenwood added that Barclays ‘needs a clear signal from shareholders that a different approach is required in future.’ Is it possible that this fresh approach could herald a new age of increased shareholder intervention? It’s rumoured that as much as a quarter of shareholders could reject the remuneration report tomorrow – with a fifth also likely to register a protest vote against Alison Carnwath, the non-executive director who has been chairing the remuneration committee for less than a year. Even though the forecast for Barclays seems brighter than anticipated, with a 22 per cent rise in headline profits to £2.44 billion in the first quarter of 2012, it is surely a positive that the shareholders’ voices are louder than ever before.

Regardless of the result tomorrow, the age of unchallenged bonuses to bank bosses looks certain to be over – the influence and power of shareholders can no longer be ignored.
Read more by Steffan Jones

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