Bankers' pay is the issue that just won't go away.
Uproar in the last week about the payouts made at Barclays and Royal Bank of Scotland has shattered any hope the banks and the government might have had of putting the matter to bed.
Trade unions, MPs, charities – everyone wants to have a go at Bob Diamond, Stephen Hester and the bosses of the other two high street banks, whose combined salaries and bonuses totted up to £19m.
Barclays revealed this week that Bob Diamond, the investment banker who took over as chief executive at the start of the year, was paid a bonus of £6.5m on top of his £250,000 salary for 2010. Mr Hester's salary and bonus at state-owned RBS came to £3.5m and Eric Daniels at Lloyds got £2.5m. HSBC's new chief executive, Stuart Gulliver, got a total of £6.2m for heading the investment bank last year.
And those figures exclude the long-term share deals – up to £4.5m in the case of Mr Hester. This was, after all, the industry that people accuse of wrecking the economy, the industry that had to be bailed out by taxpayers – directly in the case of Lloyds and HBOS and indirectly for the rest of the sector.
But what about the shareholders – the owners of the business whose money is being used to pay out millions to the managers of their companies? Well, Barclays let the cat out of the bag in its pay report by showing how much £100 invested in the bank at the end of 2005 would have been worth five years later. An investor would have lost £47 compared with a £26 gain if the money had tracked the FTSE 100 index.
Equivalent figures commissioned by The Independent from Thomson Reuters Datastream show that over the same period a shareholder in Lloyds would have lost two-thirds of their money and an RBS investor would have been left with just £9.
An HSBC shareholder would have come out with roughly the amount they started with. Only Standard Chartered would have generated returns; £100 invested in the Asia-focused bank, which has no high-street presence in the UK, would have reaped £83 over five years.
Alan MacDougall, the managing director of Pirc, the investor group, says: "These figures demonstrate why shareowners should question banks on resuming significant bonus awards.
"More specifically, we have some concerns that banks' own internal metrics can serve to inflate bonuses in certain areas of the business. It is not obvious how this is in the interests of shareowners, and will be an area where banks should expect tough questions from their investors."
Big shareholders were caught out during the boom years for waving through easy pay deals for bosses and giving the nod to risky moves such as RBS's near-fatal takeover of ABN Amro. Now they are under pressure to act as owners and protect the investments they make on our behalf.
An institutional investor in the UK banks says: "Investors are looking more on a case by case basis instead of a generalised view of the sector. It differs from the past because they are much more aware of the different strategies and business models that these companies are pursuing."
The investor says he believes HSBC is making real efforts to make its pay structure more long term and that the team at RBS is trying to revive a bank where value was almost wiped out.
At Lloyds, the concern is that Eric Daniels, the departing chief executive, will add to his 2010 earnings by getting a lucrative "consultancy" deal as he hands over to Antonio Horta-Osorio, who started this month. At Barclays, Mr Diamond's package was dwarfed by the £10m (plus share deals) payouts to investment bankers Rich Ricci and Jerry del Missier.
"At Barclays there will be a greater focus on Bob and his team and in particular the two other guys," the investor says.
"The numbers are always surprising when you see them, but we don't think the remuneration committee has done something outside the agreed packages. That's why engagement between banks and shareholder is all about what we can try to do better in future."
George Dallas, director of corporate governance at F&C Asset Management, says pay incentives at lenders are a big issue for shareholders, not just as owners of the banks themselves but as investors in other companies that suffer if the banks behave irresponsibly and damage the economy.
Mr Dallas says: "A fundamental question is how much of the pot of money that is available at the end of the period do you pay employees, retain in the business to bolster capital or return to shareholders, especially as shareholders have suffered and total shareholder return has in many cases not been good?
"In meetings with the banks we have expressed some degree of frustration that there hasn't been any collective discipline. Individual institutions will say 'I'm helpless to fight against this and to some extent that is true. If US banks and banks in Asia are not showing restraint it is difficult to make a stand."
Mr Dallas says he is pressing banks to include the quality of their loan books into management targets on pay.
Small shareholders have been hit particularly hard by the banking collapse because they relied on dividends for income. Many are also former employees who had absolute faith in their companies and ploughed money into company share schemes.
Roger Lawson, chairman of retail shareholder group ShareSoc, says the banks' shareholders are caught between anti-bank sentiment and the behaviour of the bankers themselves.
"There are a lot of disgruntled retail shareholders, particularly in RBS and Lloyds, which aren't paying any dividends at all. At Barclays, even though shareholders are getting a dividend the senior management are getting more than the dividend paid out," he says. "Banks are the pariahs of the business world and bankers bonuses only make things worse because we're pretty much back to the old gravy train."
Bob Diamond, Barclays
2010 Reward: £6.75m
Share Price Performance, 2005-2010: -46.8 per cent
Eric Daniels, Lloyds
2010 Reward: £2.5m
Share Price Performance, 2005-2010: -66.3 per cent
Stephen Hester, RBS
2010 Reward: £3.5m
Share Price Performance, 2005-2010: -90.7 per cent
Stuart Gulliver, HSBC
2010 Reward: £6.2m
Share Price Performance, 2005-2010: +0.8 per centReuse content