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New York Times DealBook, April 27, 2012 article


April 27, 2012, 10:21 am  Investment Banking

Barclays’ Board Is Heckled Over Pay


Description: Demonstrators, including several dressed as Barclays' eagle emblem, gathered outside the bank's shareholder meeting in London on Friday.

Oli Scarff/Getty Images

Demonstrators, including several dressed as Barclays’ eagle emblem, gathered outside the bank’s shareholder meeting in London on Friday.

10:36 a.m. | Updated

LONDON – Facing a London concert hall packed with angry shareholders, the management of Barclays pledged on Friday to reduce executive pay levels in favor of its investors and apologized for not communicating enough with its shareholders.

Gathering at the Royal Festival Hall in London, a venue usually reserved for music concerts, Robert E. Diamond Jr., the chief executive; Marcus Agius, the bank’s chairman; and the rest of Barclays’ board answered questions from disgruntled shareholders about why the bank paid million dollar bonuses to its senior executives while earnings and the share price fell.

The atmosphere at the meeting was hostile from the start and the speeches were repeatedly interrupted by hecklers. Mr. Diamond was booed as soon as he stepped on the stage to take his seat, and when Mr. Agius said Barclays had “made progress” over the last two years in accepting that “remuneration levels across the industry have to adjust to the new reality,” the audience burst into laughter.

But Mr. Agius defended Mr. Diamond’s £6.3 million ($10 million) pay for 2011, saying he met almost all his targets in a difficult market environment. Alison Carnwath, who is chairwoman of the remuneration committee on the board, also defended the pay decisions but acknowledged that it was “clear that this view is not shared by all shareholders.”

When Ms. Carnwath said that the “committee is under no illusions that the balance of rewards between shareholders and employees has to change in favor of shareholders,”a heckler from the audience shouted: “Why have you only just woken up to this?”

Description: Robert E. Diamond Jr., chief of Barclays.

Joshua Roberts/Bloomberg News

Robert E. Diamond Jr., chief of Barclays.

“They really struggled to justify the big pay checks,” David Pollard, a shareholder, said after the meeting had finished. “For me, a bonus is roughly 10 percent of the salary. What they have is just unbalanced.”

More than a fourth of Barclays shareholders voted against the remuneration report at the annual general meeting. The vote of 26.9 percent against the report does not require the board to act but is still a sign that many shareholders find the executive pay packages too big

Barclays’ shareholder revolt is part of a global backlash against relatively high executive compensation at a time when economies are struggling and dividends are under pressure. In a highly unusual step, Citigroup shareholders voted earlier this month against the bank’s $15 million pay package for its chief executive, Vikram S. Pandit.

Unlike Citigroup, Barclays tried to appease at least its large institutional investors before the shareholder meeting by making some changes to the remuneration packages last week. Mr. Diamond and Chris Lucas, the chief financial officer, would now lose half of their 2011 deferred stock bonus if the bank missed a profitability target over the next three years.

Mr. Diamond was awarded £6.3 million, including £2.7 million in deferred shares, for 2011, a year Barclays said it produced “unacceptable” returns. Barclays’ shares fell 34 percent last year. The shares are up 23 percent this year and the bank’s first-quarter earnings, which it reported Thursday, were better than analysts expected.

Mr. Agius said Friday that he was sorry that some shareholders felt their views on executive pay had not been taken into consideration. “What we’ve not done well this year and I admit it and I apologize for it, is handle communication,” he said. “But we don’t sit in a closed room thinking what we could get away with.”

Mr. Agius added that paying no bonuses at all, which some shareholders suggested at the meeting, was “not an option.”

“We’d be so out of line with competitors that financial consequences would be dire,” he said. That is the “brutal reality” of competition in the industry, he said.

Mr. Diamond’s British counterparts, the chief executives of Royal Bank of Scotland and Lloyds Banking Group, two banks that are partly owned by the government after a bailout, decided to give up their 2011 bonuses.

Copyright 2012 The New York Times Company




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