(Updates with investment consultancy comment in 10th paragraph.)
Feb. 10 (Bloomberg) -- Barclays Capital, the securities unit of Barclays Plc, cut the amount it paid to employees by 9 percent in 2011, drawing criticism from investors as investment banking profit shrank.
The unit gave employees an average of 203,750 pounds ($322,150), compared with 223,340 pounds in 2010 and 191,000 pounds in 2009, filings show. The figure includes salary, bonuses and pensions. Annual pay for executive directors and the eight highest-paid senior executives will fall 48 percent.
The cut “is not the signal of the change required in order to improve the investment case,” said Robert Talbut, investment committee chairman at the Association of British Insurers, whose members oversee 1.7 trillion pounds of stocks. “This appears to be very close to business as usual.”
Barclays and other U.K. banks have been under pressure from investors and politicians to show restraint on pay after the U.K. economy contracted in the fourth quarter and unemployment rose to a 16-year high. Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester last month waived his bonus after the U.K. opposition Labour Party said it would ask Parliament to vote on the award.
Barclays CEO Robert Diamond declined to comment on the size of his bonus today after receiving a 6.5 million-pound award last year.
Discretionary awards at Barclays Capital fell 30 percent to an average 64,000 pounds in 2011, the company said in a statement today. About 75 percent of the Barclays Capital bonus pool will be deferred for as long as three years, Still, base pay rose 6 percent to about 139,750 pounds in the period.
‘So Much Pressure’
“There’s been so much pressure exerted on them that they’ve had to make a move,” said Paul Mumford, who manages 650 million pounds at Cavendish Asset Management in London, including Barclays shares. “I would hope the bigger hit is on the obscene bonuses at the top, rather than the smaller ones at the bottom.”
Barclays, Britain’s third-biggest bank, said full-year profit fell 16 percent as investment-banking revenue shrank. Net income for 2011 fell to 3 billion pounds from 3.56 billion pounds a year earlier, missing the 3.27 billion-pound median estimate of 11 analysts surveyed by Bloomberg.
Barclays Capital allocated 4.89 billion pounds for pay, bonuses and pensions for the 24,000 employees at Barclays Capital in 2011, down from 5.54 billion pounds split between 24,800 employees for 2010.
Barclays was also criticized by Pensions Investment Research Consultants Ltd. for leaving 2 billion pounds of bonus payments out of its accounts. PIRC advises investors with about 1.5 trillion pounds in assets.
The bank discloses the figure in accordance with Section 411 of the Companies Act, yet does not use it to adjust its profits or balance sheet, PIRC said in an e-mailed statement today. PIRC said Barclays told it that payments owed to employees do not count as a balance sheet liability under International Financial Reporting Standards.
“The disclosures today therefore show the extent to which key performance measures are distorted by complying with IFRS,” PIRC said in the statement. Other banks account for bonuses in a similar way, the advisory firm said.
Barclays’s 2011 “true profit” was 2.9 billion pounds rather than the 5.9 billion pounds reported after deducting the bonus payments and a 2.3 billion-pound credit again, which is “another discredited IFRS quirk,” PIRC said.
Barclays said deferred bonuses are not yet a liability of the bank as they are amounts not yet earned by employees. The lender complies with company law, it said.
“The awards become payable to employees only once employees complete the relevant period of service and provided that none of the clawback conditions on the awards are triggered,” Barclays said in an e-mailed statement. “The cost for the awards will be recognized in the accounts when the service is provided. This is not a ‘quirk’ of IFRS, but a key principle of accounting.”
--With assistance from Liam Vaughan and Howard Mustoe in London. Editors: Francis Harris, Edward Evans
To contact the reporters on this story: Gavin Finch in London at firstname.lastname@example.org; Kevin Crowley in London at email@example.com
To contact the editor responsible for this story: Edward Evans at firstname.lastname@example.org