Protest at HBOS fails to stop £20m bonus for top managers

HBOS, the UK's fifth-largest bank, yesterday won approval for its controversial executive bonus scheme despite a significant protest vote from some institutional investors.

The scheme, which could generate rewards of some £20m for 130 senior managers, was opposed by shareholders casting 25 per cent of the votes.

A spokesman for the company said it was disappointed at the result, given that shareholders had voted overwhelmingly in favour of similar schemes three times in the last five years. Two years ago a comparable incentive received 97 per cent support.

HBOS has revived concerns over boardroom excess because its scheme involves the award of free shares rather than share options, which is out of line with corporate governance best practice.

"You wouldn't thank us if we failed to hold on to the best people," Lord Stevenson, the chairman, told sharehold- ers at the annual meeting in Edinburgh.

HBOS said that the chances of the scheme generating its maximum payout were about as high as "England winning the world cup twice", although shareholders would also be better off by £6bn in such an event.

James Crosby, the chief executive, could this year receive a bonus of £1.1m, twice his annual £550,000 salary. To trigger the top payout, HBOS shares must deliver the best total shareholder return among a group of eight UK peers by 6 percentage points, rather than 8 percentage points under previous plans. The group comprises Barclays, Royal Bank of Scotland, Abbey National, Lloyds TSB, CGNU, Prudential, Royal & Sun Alliance Insurance Group and Legal & General Group.

There has never been any payout under the scheme, which HBOS inherited from Halifax after the former building society's merger with the Bank of Scotland. Even if the threshold outperformance had been set at 6 percentage points in previous years, there would still have been no award.