The chief executive of Lloyds Bank has defended his £1.7 million bonus just weeks after the financial watchdog issued a record fine for incentive-driven mis-selling by the institution.
Antonio Horta-Osorio said his payout was “aligned with the interests of the taxpayer” as it was comprised entirely of shares, adding that if he did not lead the bank to financial success then his shares – and therefore bonus – would be worth less.
The payout comes despite pressure on the group to cut bonuses, after it was left counting the cost of past misdemeanours, recently revealing another £1.8 billion in payment protection insurance (PPI) provisions and a record £28m fine for paying staff “champagne bonuses” that drove mis-selling.
Politicians and unions hit out at the news, which comes after Mr Horta-Osorio’s counterparts at Barclays and Royal Bank of Scotland (RBS) waived their entitlements to bonuses for 2013.
Mr Horta-Osario’s payout was announced as Lloyds returned to bottom-line profit for the first time in three years and said it would hand out £395m to staff. The payout means the majority of staff – about 91,000 employees – will receive handouts averaging £4,500 each, although cash handouts are capped at £2,000.
“I strongly believe you should link compensation with performance and, having increased our underlying profits by 140 per cent, we thought it was appropriate to increase the bonus pool of the bank by 8 per cent,” said Mr Horta-Osario, who recently landed a bonus worth more than £2m for 2012, which was similarly linked to shares remaining above 73.6p.
Mr Horta-Osario will only receive his bonus if certain targets are met. But David Hillman, spokesman for the Robin Hood Tax campaign, said: “It’s disgraceful that a bailed-out bank gets fined billions for ripping off its customers but still pays out lottery-sized sums to its top staff. In what other industry would this be allowed to happen?”
Cathy Jamieson, Scottish Labour’s Treasury spokesman, said: “Given it was our money which bailed out this bank and it is still part-owned by the taxpayer, I can understand why so many people are angered.”
SNP MSP John Wilson said: “Once again, the banking executives have clearly highlighted how far removed they are from the world inhabited by millions of bank customers.”
TUC general-secretary Frances O’Grady said: “With Lloyds still owing billions to the taxpayer and the amount it has set aside for mis-selling rising by a whopping £1.8bn, now is not the time for its chief executive to take a multi-million-pound bonus.”
Unite said that the handout was a “kick in the teeth to the taxpayer, and to staff who don’t know if they will be next in line for the chop from one day to the next”.
Lloyds said the chief executive’s windfall is deferred for five years and is dependent on the government selling another 50 per cent of its remaining 33 per cent stake or the share price holding above 73.6p consecutively for six months.
Alastair Blair, head of consultants Accenture’s UK and Ireland banking practice, defended the decision: “Clearly the shareholders are comfortable with this – the government approved it. And it won’t be paid for another five years, so there’s a lot of water to pass under the bridge.”