Lloyds faces activist ambush at AGM over new chief's £13.4m golden hello

Published on Thursday 12 May 2011 15:40

AN INVESTOR rebellion looms for Lloyds Banking Group at its Glasgow AGM this week over the controversial £13.4 million golden hello for new chief executive Antonio Horta-Osorio.

That and wider remuneration concerns at the part state-owned bank are spearheaded by Pensions Investment Research Consultants (PIRC) and the influential Association of British Insurers. It comes as the new Lloyds boss, poached from Santander, and Lloyds chairman Sir Win Bischoff are also expected to offer shareholders no reassurance over the future of the group's Scottish Widows' subsidiary.

Widows, the Edinburgh- based life assurance and asset management business, was bought by Lloyds for 7bn in 1999. But there is a growing belief that Horta-Osorio views the business as "non-core" ahead of a key strategic review he is set to unveil to investors in late June.

PIRC revealed it was urging shareholders to oppose Lloyds's remuneration report, It said: "The new chief executive received a grant of shares equalling 420 per cent of his base salary upon joining the company, which we would flag as a major concern, especially following a financial year when the bank reported a net loss." At the pre-tax level, however, Lloyds announced a 2.2bn profit against a 6.3bn loss in 2009.

PIRC said it was concerned that actual targets had not been provided for the bank's annual incentive bonus scheme for executive directors.

The shareholder activist group also said it was unhappy about one criterion for the long term investment performance (LTIP) grant in 2010 being linked to the company's absolute share price.

The Association of British Insurers, whose members account for nearly 20 per cent of the stock market, has issued an "amber" alert on Lloyds's remuneration report ahead of Wednesday's shareholder meeting. This is its second highest warning, expressing concerns compared with the outright disapproval signified by a "red" top alert.

It is understood the ABI also has misgivings that performance targets for LTIPs at the bank have not been made public, meaning shareholders will have to vote this week without key information. There is also believed to be disquiet at the ABI about an unusual pension scheme for the new boss.

An ABI spokesman said: "An amber top indicates there are issues for (Lloyds] shareholders to make a judgement on. It is now up to shareholders to make up their own mind ahead of the AGM."