Bloomberg News

Barclays CEO Will Forgo Part of Bonus to Appease Shareholders

April 19, 2012

Barclays Plc (BARC) Chief Executive Officer Robert Diamond will forgo about 11 percent of his total compensation until the bank improves profitability in a bid to placate investors opposed to his pay package.

Diamond and Finance Director Chris Lucas will lose 50 percent of their deferred bonuses for 2011 if the company’s return on equity fails to exceed the cost of equity within three years, London-based Barclays said in a statement today. Lucas received a 1.8 million-pound ($2.9 million) deferred bonus in stock and Diamond 2.7 million pounds, part of his 12 million- pound total compensation for the year.

Barclays is trying to assuage opposition from shareholders who will vote on the bank’s pay plans on April 27. Diamond, 60, described the lender’s profitability as “unacceptable” in February and pledged to improve it. Citigroup Inc. (C:US) investors this week rejected the New York-based bank’s executive pay plan.

“This move will hopefully get shareholders off their back,” said Gary Greenwood, an analyst at Shore Capital Group in (JNS:US) Liverpool. “Their remuneration is high when you compare it with other domestic U.K. banks.”

Barclays said in February it may fail to hit its 13 percent target for ROE by 2013 after it fell to 6.6 percent in 2011. The bank’s cost of equity was 11.5 percent for 2011.

Pensions Investment Research Consultants Ltd. this month urged investors to vote down Diamond’s pay and reiterated its advice today.

“The announcement does not address the fundamental issue of rewards for failure,” said PIRC in a statement. “The proposed change acknowledges a problem with the bonus scheme, but still keeps it in place.’

Under Scrutiny

The Association of British Insurers, whose members own between 15 percent and 20 percent of all Britain’s publicly traded companies, said Barclays’s pay plans should be scrutinized before shareholders vote on the awards.

The bank made the changes ‘‘recognizing the strength of opinion expressed by some shareholders,” Barclays said in today’s statement. “Barclays is fully committed to ensuring that a greater proportion of income and profits flow to shareholders.”

Standard Life Plc (SL/)’s Guy Jubb, global head of governance and stewardship, said the shareholder would vote to support the bank’s pay report.

“Our key concerns over last year’s executive bonuses have been addressed,” Jubb said, in an e-mailed statement. “The result is a much better alignment with pay for performance than was initially proposed.

Fiscal Squeeze

Prime Minister David Cameron urged banks in January to show ‘‘proper regard’’ in limiting bonuses and demonstrate how pay is related to performance as the government executes the tightest fiscal squeeze since World War II.

Barclays’s deferred share bonuses awarded for 2011 are paid in three equal parts in 2013, 2014 and 2015. Today’s announcement won’t affect Diamond’s separate 2.25 million-pound long term incentive bonus, the bank said. In all, he got as much as 6.3 million pounds in salary, bonuses and stock awards for 2011 as well as a 5.75 million-pound contribution toward his personal tax bill.

Lloyds (LLOY), Britain’s largest mortgage lender, paid CEO Antonio Horta-Osorio a total of 1.97 million pounds in 2011. Royal Bank of Scotland (RBS) CEO Stephen Hester’s salary was frozen at 1.2 million pounds, while he received a long-term stock award the lender expects to be valued at about 1.6 million pounds.

To contact the reporters on this story: Howard Mustoe in London at hmustoe@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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