Clydesdale Bank owner hit by backlash over bosses’ pay

Clydesdale Bank owner CYBG has suffered an investor backlash over bonuses for top executives after more than a third of shareholders voted against pay plans.

The Glasgow-headquartered group, which recently acquired Virgin Money for some £1.7 billion, said 34.2 per cent of investor votes were made against its pay plans at its annual general meeting (AGM), which was held in Melbourne, Australia. A further 7.4 million shareholder votes were withheld.

CYBG, which also owns Yorkshire Bank, said that while the plans were approved, with 65.8 per cent of shareholders voting in favour, it “recognises the large number of votes opposing the resolution” and has pledged further talks with investors.

The investor rebellion comes after the group revealed plans to boost payouts and bonuses for chief executive David Duffy and chief financial officer Ian Smith.

The plans mean Duffy’s potential bonuses would rise to 118 per cent of his salary, while his long-term share payout would rise to 177 per cent – meaning his total maximum payout could jump from £1.8 million to a possible £4.2m if all targets are met.

Smith could see his total pay package leap from £914,000 to some £2.1m.

On the shareholder vote, CYBG said: “In addition to the extensive consultation of shareholders undertaken prior to the publication of the directors’ remuneration report, the company will further engage with shareholders on the implementation of its remuneration policy over the coming months to ensure shareholder views are fully understood and considered.

“These views will also inform the company’s remuneration policy which will be subject to shareholder approval at the company’s 2020 annual general meeting.”

Shareholder advisory group ISS had suggested investors should vote down the proposals ahead of the annual meeting, questioning the rationale of the pay plans so soon after the Virgin deal, adding CYBG’s shares have dropped sharply since the takeover was approved.

But CYBG is said to have defended the pay plans due to the Virgin deal having boosted the size and complexity of the group.

The AGM vote also saw 6 per cent of investors vote against re-electing both Duffy and Smith.

In November, CYBG reported a pre-tax loss of £164m for the year to 30 September, compared with a £268m profit in 2017.

This was largely due to redress expenses of £352m linked with historical payment protection insurance (PPI) claims. CYBG also said it would up PPI provisions by £150m as it estimated 83,000 future claims before the August deadline, although complaint volumes have been falling since the end of July.

CYBG completed its takeover of Virgin Money in October, announcing it would transition to the Virgin name and bring to a close the centuries-old Clydesdale brand, although this is to stay in place for at least the next year.