Barclays was stung by shareholders today after nearly a third of their votes failed to back the bank's bumper pay awards.
Following a heated annual meeting, 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.
Chief executive Bob Diamond sparked anger among shareholders when it emerged he would receive £17.7 million in salary, bonus, benefits and vested long-term share awards last year, despite admitting his bank's performance was "unacceptable" in 2011.
he protest vote is a sizeable one in terms of recent corporate history and will send a powerful message to the bank's board.
The blow comes at a time when the Government is consulting on plans to return power to shareholders, which would include introducing a binding vote on executive salaries.
Business Secretary Vince Cable welcomed signs of what he said was shareholders "doing what they are supposed to do, which is holding executives to account".
Mr Cable is reportedly still considering a proposal to require the backing of 75% of shareholder votes on company resolutions, such as pay deals.
The Barclays vote came despite an apology from chairman Marcus Agius, whose admission that the bank failed to engage with shareholders was met with heckling, shouting and heated questions over the bank's pay culture.
Mr Agius defended the bank's position, saying "the brutal reality" was that paying "zero bonus" was not an option.
Responding to a shareholder question about why Mr Diamond merited any bonus at all, Mr Agius said: "We operate in an international competitive industry. We have to fight for our business every day.
"It's not an option to pay zero bonus. We would be so far out of line with our competitors that the commercial consequences would be dire."
A significant vote against the pay report and Ms Carnworth's re-election was expected after the Local Authority Pension Fund Forum, the Pensions & Investment Research Consultants and the Association of British Insurers warned members over the pay scheme.
And institutional investors, including Fidelity, Aviva and Scottish Widows, said they would vote against the report or re-election of Ms Carnwath.
Robert Talbut, ABI investment committee chairman, said today'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 in the meeting, 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 and applause from the auditorium.
Ms Carnwath went on: "We will continue to seek to push down remuneration levels in the context of the environment in which we operate."
Ms Carnwath was met with further taunts, such as: "Why have you only just woken up to this?"
Yesterday, the bank reported an adjusted return of equity of 12.2% in the quarter - a key figure as Barclays has pledged to hit annual return of equity of 13%.
Mr Diamond previously told shareholders it was "unacceptable" that the bank recorded a return of equity of just 5.8% in 2011, down from 7.2% the previous year.
The American banker tried to win support for the pay report by offering to sacrifice half of his £2.7 million all-shares bonus for 2011 if certain performance targets are not met within three years.
He also hailed the 22% rise in first-quarter underlying pre-tax profits to £2.4 billion unveiled in yesterday's results.
But a £5.7 million tax payment made on Mr Diamond's behalf when he moved from the United States to London to take up the role also provoked anger among investor groups.
Outside the meeting, in the pouring rain, there were dozens of protesters from the World Development Movement and Robin Hood Tax campaign.
The Robin Hood campaigners posed with a giant cheque to represent the implied subsidy provided to banks by the taxpayer.
Diarmaid McDonald, 31, with the Robin Hood movement, said: "We should not be held to ransom by the financial sector. They are as much part of this society as we are."
Alan MacDougall, managing director of 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%, while the average vote against a director facing election was approximately 1%, which puts the scale of today's revolt into context.
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."