Lloyds set for pay deal grilling
Tuesday 17 May 2011
Taxpayer-backed Lloyds Banking Group is expected to face tough questions at its annual meeting tomorrow over a multimillion-pound pay deal for its new chief executive.
Shareholder groups the Association of British Insurers (ABI) and Pirc have both raised concerns about Antonio Horta-Osorio's signing-on deal, worth up to £13.4 million, to their members.
ABI, whose members control up to 20% of the stock market, issued an amber-top alert over the pay package, while Pirc recommended voting against the Lloyds remuneration report.
Both shareholder groups have also highlighted the issue of disclosure, as performance targets for long-term incentive plans (LTIP) have not been made public, which means investors will vote on the plans at the AGM in Glasgow without knowing the full details.
Lloyds, which revealed a £3.2 billion provision for payment protection insurance claims earlier this month, is expected to reveal the LTIP details in its strategic review next month.
Pirc said Mr Horta-Osorio received a grant of shares equalling 420% of his base salary upon joining the company and it would flag this as a "major concern" adding "especially following a financial year where the bank reported a net loss".
The group said: "The company's justification for such an award revolves around the facilitation of his recruitment, which we consider as being against best practice."
ABI stressed the purpose of an amber-top alert was to encourage shareholders to look more closely at the highlighted issue.
Shareholders are also likely to grill the board over the future of the group's Scottish Widows subsidiary.
Scottish Widows, the Edinburgh-based life assurance and asset management business, was bought by Lloyds for £7 billion in 1999.
But there has been increased speculation that Mr Horta-Osorio, who joined Lloyds from Spanish bank Santander, views the business as "non-core" and will sell the business as part of his strategic review.
Stripping out the PPI provision, the lender made a £284 million pre-tax profit in the first quarter, compared to £1.1 billion the previous year.
The meeting comes two months after the Independent Commission on Banking (ICB) interim report, which told Lloyds its planned sale of 600 branches, as agreed with European regulators, did not go far enough.
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