In the late 1970s to early 1980s you couldn't cross a UK university campus without being confronted with posters calling for a boycott of Barclays over its involvement in South Africa's apartheid regime. Placards were plastered everywhere, while some of the more cussed protesters took their anger to the streets. Overseas, the bank became known as the "Boerclaysbank".
The boycott worked – by the mid- 1980s the bank's share of the UK student market nearly halved to 15 per cent. South Africa was only a small part of its business, but the doggedness of the campaign forced the bank to accept that its continued presence there could no longer be justified. Barclays pulled out in 1986 because it couldn't afford to lose any more students – future customers – and certainly couldn't afford further damage to its reputation.
Is Barclays going through an apartheid moment today – not with a nasty regime – but with its own directors? This time, it's Barclays' shareholders who are unhappy – with the sky-high bonuses and complicated tax perks being paid to top directors, including the chief executive, Bob Diamond, and finance director, Chris Lucas. Specifically, they are unhappy with the extraordinary decision to pay a £5.7m tax "equalisation" payment to Diamond – agreed because he has to pay tax in the UK and US – as part of his total £17.7m pay package.
Diamond's bonus is equivalent to 200 per cent of his salary while that being paid to Lucas is worth 225 per cent of his basic pay. Another two executives, Jerry del Missier and Rich Ricci, Diamond's henchmen at Barclays Capital, are being paid a whopping £6.7m and £6.5m each.
What has stuck in investors' craws is that Diamond admitted, when the bank's results were announced in February, that the 6.6 per cent return on capital was not acceptable. (I can remember in the 1980s when Lord Camoys, head of BZW – the bank's first attempt at investment banking – said that anything below a 25 per cent return would be unacceptable.)
How times have changed. And the biggest change is that bankers now get paid more than investors; the ratio of capital being spent on employees is way out of proportion to what is paid in dividends. Nor has the share price been good – over the past five years Barclays shares have collapsed by 70 per cent. No wonder investors are angry – if the rationale for paying top dollar to bosses is that they deliver high-octane performance, then it's all the more difficult to defend these packages.
And yet it does. Marcus Agius, Barclays' chairman, and his board are still trotting out the old chestnut that bumper salaries are justified on the grounds that, if they don't pay them, people like Diamond will up sticks and leave. I don't buy this; it's a cheap form of blackmail. Nor do I think it's true. And if they walk? Well, let them. I can't believe there aren't equally talented bankers down the ladder.
No, they are being paid so much because they can get away with it; or at least have been able to until now. But, as I wrote a few weeks ago, it doesn't matter how much the public – or the media – rants about executive salaries; the situation will only change if investors want change.
It seems they finally do. Four big funds including Standard Life, Aviva, Fidelity and Scottish Widows, which together own around 7 per cent of Barclays, are said to be planning to vote at next week's annual meeting against both the packages and the re-election of Alison Carnwath, chairman of the remuneration committee. Other investors are said to be equally twitchy.
In a rare show of muscle, the Association of British Insurers, which represents around half of the UK investors in Barclays, has put out an "amber top" alert, warning investors to look carefully at the packages' small print – and at Diamond's tax deal which will last as long as he is at Barclays. The amber top is explosive and is bound to encourage more investors to vote against.
Barclays can't afford more bad PR before customers start to walk – it's already got a messy reputation over tax, and was forced to pay back £500m to Her Majesty's Revenue and Customs over an attempted tax avoidance scheme.
If it wants to defuse this latest wrangle, the board should renegotiate Diamond's tax deal and promise to look again at the pay of top staff. Rivals will like it too, as it could help bring down pay across the industry, thus blowing the argument that it's by paying big bonuses that you stop bankers going to competitors.
Osborne should confound his critics with a flat cap on charitable tax relief
One of the ironies of life is that the richer you are, the more you can pay clever people to help find wheezes to avoid paying tax – just as Barclays and millions of other companies and wealthy individuals do on a daily basis. It appears that stopping the rich from channeling money through charities, mainly overseas ones, as a tax dodge is one of the reasons why George Osborne came up with the idea of setting a £50,000 cap on tax relief – or 25 per cent of an individual's income – whichever is higher, on charitable donations.
There aren't any numbers available for how much tax the Treasury estimates is evaded in this way, but I do know from people in the City that it is definitely one of the many tricks used by the wealthy to reduce their tax burden. Understandably, there's now a backlash brewing against Osborne's move with politicians and charity experts warning that the cap could cost several billions in lost donations.
There are two reasons why they are wrong, and hitting out at the wrong target. First, there is no reason at all why charities should be considered special and have any relief at all. On the basis that giving is good for society, there are many equally worthy causes that individuals could claim should get relief – buying a house for an elderly relative, say, or buying an adapted car for a disabled friend. Why shouldn't they be allowed to set these gifts against tax in the same way that someone giving to the Tate is? (Much City philanthropy is a quick way to get a knighthood or other favours, in any case.)
And second, instead of moaning about Osborne's cap, the protesters should be arguing for a flat-rate tax. It's a fact of life that tax avoidance only comes about because people believe they are paying too much tax; a flat tax – say of between 15 and 20 per cent on all income and capital income – would at a stroke wipe out the tax avoidance industry and simplify the ludicrous system of reliefs that've been created. For a self-professed radical, it's time Osborne went for a flat cap.