Ben Chu: Investors beware - at Barclays, three years is seen as the 'long term'

 

Outlook Antony Jenkins, who says he aspires to make Barclays the "go to" bank, instructed Bob Diamond's old comrade-in-arms, Rich Ricci, to go forth and multiply. And so yet another wing of the Wall Street wannabe banking house that Bob built is knocked down. Good riddance.

But as we wave off the American racehorse enthusiast, let's not overlook the fact that Mr Ricci performed a valuable public service last month. On Budget Day (suspicious timing from a supposedly reforming bank), Barclays announced that it had awarded him 5.7 million shares. And the opulently monikered one offloaded the lot immediately. With the shares worth 308p each at that time, Mr Ricci realised £17.5m.

We could not have hoped for a better demonstration of why the remuneration systems in our giant banks remain a giant machine for shafting shareholders.

The banking lobby, of course, solemnly inform us that the pay problem in banks has now been resolved. Yes, things got out of hand in the boom, they concede, but bankers’ bonuses are now mostly paid in shares. This fully aligns their interests with those of their shareholders.

We're told that bonuses are now deferred for a number of years, meaning that if the bank gets into trouble those generous bonuses can be withheld. The old moral hazard problem where bankers were paid huge wedges before anyone knew whether or not their investments had blown up is a thing of the past.

There will strictly be no more rewards for failure. So move along everyone, nothing to see. But then, helpfully, up pops Mr Ricci with an act of such staggeringly insouciant greed that no one with eyes in their head can possibly ignore it.

A chunk of his most recent bonus pot (we're not told by Barclays how precisely how much) was payouts from his "long-term incentive plan". Long-term sounds good, doesn't it? Sounds comforting.

But what does it mean? Precisely how many years does a banker need to wait before he gets paid under this plan? Have a guess. Ten? Twenty? Wrong. Try three. Yes for Barclays (and also the rest of our big banks, including the majority taxpayer-owned Royal Bank of Scotland) the "long-term" translates as three measly years, or 36 months. Even a mayfly plans further into the future than that.

The deferral periods on the ordinary bonuses paid to lower-ranking traders are just as incredible. Bankers, again, only need to wait for around three years before they get their hands on their shares – a period that the Bank of England recently pointed out is shorter than even the most abbreviated credit cycle on record.

But the gravest scandal is that bankers can sell their shares awards the moment they receive them, as Mr Ricci has shown us. In other words, the interests of bankers and shareholders are aligned only up to the moment the banker gets paid.

Barclays briefed that Mr Ricci sold the stock because he was overexposed to the bank's equity and he needed to rebalance his portfolio. But over exposure is the entire point. Rational shareholders should want him and other bankers to be overexposed to Barclays because then these guys will be gambling with their own money.

Note that Mr Ricci wasn't alone in cashing out of his employer's equity last month. Of the 13 million shares handed out to nine Barclays directors, 11.7 million were immediately sold. Antony Jenkins himself offloaded just over half of his 1.8 million award as soon as it vested, sucking in £2.9m in cash for himself.

Mr Jenkins has had a personnel clearout at Barclays. It may even continue. But it's not just about people. It's about behaviour. Perhaps when Barclays' employees start to regard three years as the short term, rather than the long term, it will be time to take his reforming spiel seriously.

Suggested Topics
News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum