More bonuses may be clawed back as Lloyds grapples with PPI losses

LLOYDS Banking Group may claw back some of the £375 million in bonuses paid out to top bosses last year after it was forced to set aside £3.57 billion over mis-sold payment protection insurance.

Anthony Watson, the bank’s senior independent director and chairman of the remuneration committee, told the Treasury select committee that no decision had been taken, “but of course we have to consider it” as the provision had triggered a £3bn-plus loss for the year.

“I can assure you it will be part of our deliberations,” Watson said.

In February the bank announced it was clawing back nearly £1.5m in bonuses from top executives, including former chief executive Eric Daniels, for “accountability” for the PPI mis-selling. The bank stressed there was no wrongdoing involved.

A Lloyds spokesman said after yesterday’s hearing that any further bonus clawback related to the issue remained “hypothetical”.

Yesterday’s hearing was to take evidence from experts on corporate governance and remuneration in the financial services sector.

It came as a survey was published reigniting the row over executive pay, which showed that rewards for blue-chip bosses rose 12 per cent to an average of £4.8m last year.

That far outstripped the 1 per cent average rise for employees in 2011, according to the report by proxy voting agency Manifest and remuneration consultancy MM&K.

Daniel Stilitz, QC, of think-tank the High Pay Centre, told MPs: “Notwithstanding the ‘shareholder spring’, the general trend [of surging banking pay] has not stopped.”

Stilitz said there was still no transparency on remuneration in banks below board level. And David Pitt-Watson, chairman of Hermes Focus Asset Management, said: “I don’t think anyone would deny we have had very considerable inflation in executive pay.”

Pitt-Watson said executives had been “chasing the prize” of triggering bonuses and long-term incentive plans rather than focusing on their fiduciary duty.

John Thurso, Liberal Democrat MP for Caithness, Sutherland and Easter Ross, said remuneration for top executives looked like a basic salary being “just a retainer”, with the main money earned through bonuses and long-term incentive plans.

Labour MP George Mudie asked why bankers needed big bonuses to do a good job, while workers such as nurses often did good work for a basic salary.

John Lee, managing partner of FIT Remuneration Consultants, said: “It’s not the job of the capitalist system to look at the ratio of remuneration between a nurse and a chief executive.”

Mudie urged employee representation on remuneration committees, saying it would “bring some reality from the outside world”.

But Watson said they were a sub-committee of the main board and represented the whole company and not particular interest groups.

A shareholder revolt against chief executive Sir Martin Sorrell’s near- £13 million pay package is expected at today’s AGM of advertising agency WPP in Dublin.

Just under a third of shareholders voted against the pay report at electronic parts distributor Premier Farnell.