Tide turns on bank bonuses as revolt hits UK

• A third of Barclays shareholders refuse to back pay awards

• Majority of anger directed at chief executive Bob Diamond

• Chairman says zero bonuses is not an option

Anger over a £17.7 million package awarded to Barclays chief executive Bob Diamond sparked the revolt at the bank’s annual general meeting, in one of the biggest UK shareholder rebellions in recent history.

The protest vote came just ten days after more than half of shareholders in the US giant Citigroup rejected a plan to pay their chief executive, Vikram Pundit, $15m (£9.2m) for 2011.

Last night, there were signs that the revolt could represent a watershed with a rebalancing of power from highly paid banking management towards shareholder.

Barclays’ failure to win over such a significant proportion of those who attended the meeting in London suggests that even institutional shareholders are no longer prepared to buy the argument that enormous salaries and bonuses are required to retain the best people.

Shareholders’ pressure groups said the vote was “humiliating” for Barclays, even though there was still enough support to approve the report.

David Paterson, head of corporate governance at the National Association of Pension Funds, said: “The vote may have been passed, but the level of dissent about executive pay at Barclays needs to be taken seriously by the company and by the rest of the banking industry.

“Boardroom pay in the sector needs to be better aligned with the long-term interests of shareholders.”

After the heated meeting, which was punctuated with heckling and laughter, Barclays revealed that 32 per cent of investors voted against or withheld votes for the bank’s pay report, while 24 per cent failed to back remuneration committee chairman Alison Carnwath.

Much of the anger was directed at the £17.7m received by Mr Diamond in salary, bonus, benefits and vested long-term share awards last year, despite admitting his bank’s performance was “unacceptable” in 2011.

Alan MacDougall, managing director of the corporate governance experts PIRC, said: “This vote is humiliating for Barclays and will cement its reputation as a bank that just doesn’t get it when it comes to concerns about excessive pay at the top.”

He called on Barclays to “do the right thing” and issue a statement setting out how it intends to address shareholder concerns as soon as possible. PIRC estimates that the average vote against a remuneration report last year was about 6 per cent, while the average vote against a director facing election was approximately 1 per cent, which puts the scale of yesterday’s revolt into context.

The vote was held after the Barclays’ chairman, Marcus Agius, apologised for the firm’s failure to communicate over the issue of high pay.

His speech at the AGM was met with derisive laughter from shareholders, many of whom could not conceal their anger.

In total, 26.9 per cent voted against the company’s remuneration report. When those who abstained were included, the percentage rose to 32 per cent of shareholders.

“There is a significant minority of shareholders who feel that we got some of these judgments [on remuneration] wrong for 2011 and that we have not sufficiently taken their views on board,” Mr Agius said.

“For this I apologise, and I assure you that in the future we will be engaging differently and more purposefully with shareholders in order to ensure that we obtain a broader level of support on remuneration policy and practice,” he said.

Mr Agius said it was “not an option” to pay zero bonus.

“We operate in an international competitive industry. We have to fight for our business every day. We would be so far out of line with our competitors that the commercial consequences would be dire.”

However, there was no disguising the anger among shareholders, with one saying: “Barclays is not run for its shareholders, but as a milch cow for its officers and staff.”

Sarah Wilson, a shareholder adviser, said it was a significant protest vote.

“The average level of dissent on these issues is about 10 per cent. So from that point of view, it’s a very large company, there’s a lot of worldwide shareholders to try and corral and get their opinions in,” she said.

“So I think in terms of shareholders getting their point across, this is going to go down in the books as one of the most serious rebellions that we’ve seen for a long time.”

Awards ‘weren’t reduced enough’ in 2011

Tim Bush, from shareholder advisory group Pirc, was at the meeting. He said: “He [Mr Agius] suggested that he could actually justify Bob Diamond’s pay as actually being paid to set the bank up for the future.

“Now I’m not aware of anyone really being paid in advance.”

Robert Talbut, ABI investment committee chairman, said yesterday’s vote “clearly shows the investor concern” with the company’s remuneration policy.

He said: “Investors take executive pay very seriously. Getting it right is an important part of a successful company.”

Earlier, Ms Carnwath was given the opportunity to defend her record. She said: “We reduced awards significantly in 2011.”

But in response, one shareholder heckled “not enough”, triggering laughter.

Ms Carnwath went on: “We will continue to seek to push down remuneration levels in the context of the environment in which we operate.”

There were concessions made on the bonuses of the chief executive and finance director last week.

Mr Diamond and finance director Chris Lucas agreed they would receive only half of their bonuses awarded for last year until certain targets for the bank had been met.

Barclays recently reported an adjusted return of equity of 12.2 per cent in the quarter – a key figure as Barclays has pledged to hit annual return of equity of 13 per cent.

Mr Diamond previously told shareholders it was “unacceptable” that the bank recorded a return of equity of just 5.8 per cent in 2011, down from 7.2 per cent the previous year.

Yesterday, the bank recorded a 22 per cent rise in first-quarter underlying pre-tax profits to £2.4 billion.