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Barclays risks investor rebellion over Bob Diamond's £8.2m pay
Barclays shareholders are being urged to vote against an 'excessive' pay package for the bank's chief executive Bob Diamond.
Barclays (BARC.L) faces a rebellion at its annual general meeting in two weeks’ time after investor groups and leading shareholders expressed their opposition to chief executive Bob Diamond’s £8.2 million pay package.
Diamond, 59, was paid a total salary, bonus and cash of just under £2.5 million last year, according to Barclays’ annual report. This was up from £2.3 million in 2010 despite a 3% fall in pre-tax profits and a share price that has fallen 23% in the past 12 months.
What has really infuriated critics is a £5.7 million ‘tax equalisation’ payment Barclays made to pay tax liabilities generated by Diamond’s move from the US to the UK when he became chief executive.
This payment could breach guidelines set out last year by the Association of British Insurers (ABI). If so, this could spell trouble for Barclays, as the ABI wields a lot of influence over how institutional investors vote at company AGMs.
The ABI has not commented on whether it will issue a ‘red’ or ‘amber’ guidance alert to its members before Barclays’ AGM on 27 April. The bank has said it does not think the tax payment breaks the ABI code.
Meanwhile, Pensions & Investment Research Consultants (Pirc) has urged institutional shareholders to vote down Barclays’ remuneration report at the AGM. Pirc estimates Diamond’s total package could be worth as much as £17.7 million when share options and long-term incentive plans are included. It says such payments are inappropriate given that Barclays' shares are trading well below the bank’s net asset value.
Pirc says Barclays should consider clawing back some of the payments as Diamond, the former head of Barclays Capital, its investment bank, has been part of the bank’s management team for some years. Lloyds (LLOY.L) clawed back some of the bonus paid to its former boss Eric Daniels in response to the mis-selling of payment protection insurance which cost that bank over £3 billion.
ShareSoc, the private shareholders action group, has also expressed its anger at Diamond’s pay package. Its chairman Roger Lawson said: ‘Our stance is that the aggressive bonus arrangements at all banks should be restrained as they were one cause of the financial difficulties that consumed the banking sector in recent years.’
On the tax equalisation payment, Lawson added: ‘It should not be the responsibility of any company to pay an employee's additional tax charges as a result of relocation from one tax jurisdiction to another.’
These calls may not go unheeded. Leading investors such as Standard Life, Fidelity, Aviva and Scottish Widows are reportedly preparing to protest against Diamond’s pay at the AGM. They account for around 6.5% of the bank’s shares.
Barclays argues that it does not deserve the same scrutiny on bonuses as its taxpayer-backed rivals Lloyds and Royal Bank of Scotland (RBS.L). However, with a share price that is still suffering the after affects of the financial crisis, it is hardly arguing from a position of strength.
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