Shareholders and unions lambast Barclays for 'two-finger salute'
Anger over bonus deals for investment bankers amid job cuts and flat dividends
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Wednesday 12 February 2014
City investors, politicians, unions and even the Institute of Directors united against Barclays' bumper bonus deals for its investment bankers last night.
Barclays declared that although profits in its investment banking arm had fallen 37 per cent last year, it was giving the division's staff a 13 per cent rise in their bonus pot.
Meanwhile, in what was described by unions as a "two fingers up" to high-street bank employees, Barclays said it would cut between 10,000 and 12,000 jobs this year. Of those, 7,000 will be in the UK and include more than 800 senior managers; 400 will be from the investment bank.
Unusually, big City shareholders were among the most vocal critics of the bonuses, saying they would call for urgent talks with management on the subject of how pay for staff was rising rapidly when shareholders' dividends were flat. Last year investors had to pump a further £6bn into the bank in the form of a rights issue to build up its capital cushion to pass regulatory requirements.
The chief executive Antony Jenkins – who voluntarily waived his own bonus due, in part, to the cost legacy of scandals such as the Libor-fixing affair – said he needed to keep paying investment bankers well in order to retain and attract the best staff, from "Singapore to San Francisco". However, his claim did not wash with shareholders in the wake of the investment bank's poor performance.
One top 20 shareholder told The Independent: "The strongest message we will be giving the company is that it needs to narrow the disparity between returns to staff and the returns to shareholders.
"We've been badgering them about this for some time now and are not happy with the current situation. The pressure is going to increase on Antony Jenkins over the next few months. He needs to increase the slice of the cake he is handing back to shareholders."
Another declared: "There are only so many things under Jenkins' control and compensation is one of them. It's frustrating to see the bonus pot up.
"It all begs the question: who are the banks being run for at the moment? Is it bankers, society, regulators? It certainly doesn't seem like shareholders."
Barclays said bonus awards in the investment banking division rose by 13 per cent to a total of £1.58bn. That is the equivalent of an average £60,100 per head and came despite the division's pre-tax profit falling 37 per cent to £2.5bn. Across the whole company, the bonus pot was £2.4bn, while underlying profit before tax fell 32 per cent to £5.2bn.
The dividend remained at 6.5p a share for the year, or £859m – almost half of the bonus pot for its investment bankers and nearly a third of the total in bonuses paid across the group.
Louise Cooper, the City commentator, highlighted the extent to which City analysts were unimpressed by the chief executive's words on his bankers' pay: "Not many believed Jenkins when he stated that the increase was 'required to protect the franchise in the long-term interests of shareholders'. There was much scepticism that the investment banking unit could ever achieve decent returns for shareholders given so much of the profits were given to staff."
Roger Barker, director of corporate governance at the Institute of Directors, agreed: "It cannot be right in any business for the executive bonus pool to be nearly three times bigger than the total dividend payout to the company's owners."
He urged big City fund managers to hold the bank to account over its bonus payments and force it to change.
Andrew Tyrie, chairman of the Treasury Select Committee, reinforced that sentiment: "Shareholders need to make up their minds whether aggregate remuneration is justified by the return on equity."
Mr Jenkins said he was attempting to turn Barclays into what he called the "Go To" bank for customers and claimed: "We are starting to rebuild trust in Barclays."
This trust-building exercise was jeopardised at the weekend when it emerged that the details of 27,000 Barclays customers had been stolen, followed by an embarrassment on Monday over concerns that yesterday's profit announcement had been leaked to the media.
Trust in Barclays has also been shaken in recent years by scandals including: the Libor-fixing affair, which cost it £290m in fines; payment protection insurance mis-selling (£2bn); the mis-selling of billions of pounds of interest rate insurance to small businesses; taking part in a euro interest rate derivatives cartel; and the use of off-balance sheet vehicles like Protium to house potentially toxic assets.
It is currently being investigated over the foreign exchange fixing scandal and alleged payments made to Qatari intermediaries while it was raising money in the Middle East in 2008.
Mr Jenkins is trying to change the culture of the bank by re-educating staff about how to act in a more ethical manner. He is also getting Barclays out of some of its more risky areas of business. The shares fell 2 per cent to 269.03p.
RBS scandal: Employee lifts the lid
A whistleblower at the controversial Royal Bank of Scotland division that specialises in dealing with companies in financial difficulties has claimed RBS used "immoral" tactics and charged exorbitant fees in order to force businesses under and then seize control of them.
The anonymous employee said the bank's Global Restructuring Group changed its ethos in 2008 from aiming to help businesses recover to extracting maximum cash from them at all costs. "From that point on, we wouldn't be just looking to save businesses. We would be looking to recover all the monies back." He told Channel 4 News that the amount of cases deemed "saveable" fell suddenly from 75 per cent to about 40 per cent.
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