Leading article: Time for investors to take control

 

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Barclays has certainly tried to avoid the looming embarrassment of a shareholder rebellion over the chief executive's £17m pay package. Only last week, the bank added new targets to its top managers' bonus schemes in an effort to win back institutional shareholders voicing increasingly public concerns. And Bob Diamond will be hoping that yesterday's financial results – showing profits soaring by a forecast-beating 22 per cent – will also help ease the expected tension at today's annual general meeting.

Barclays' shareholders must pay no attention to such blandishments. After all, the bank may have avoided a taxpayer bailout, but its share price is still a fraction of what it was before the financial crisis. And the extra £300m allocated to meet payment protection insurance mis-selling claims – on top of the £1bn already set aside for the purpose – is hardly an endorsement of the management.

There is a wider issue here. For too long investors have failed to discharge their responsibilities. It is shareholder complacency that has allowed a culture of rewarding failure as spectacularly as success. That investors at Barclays are showing signs of throwing off their torpor is, therefore, to be welcomed. But it would be a mistake to be too optimistic. At the very best, only a third of shareholders are expected to vote No today; and the company need not change its plans, even if they do.

In a coincidence of timing, today also sees the conclusion of the Government's consultation on plans to make remuneration votes binding. In spirit, the Business Secretary's proposals have much to recommend them. But unless the extra powers are used, they will be of little account. Neither are the precedents promising: in the decade since the introduction of so-called "advisory" votes, little has been done with them.

The economic crisis and its aftermath has exposed the extent to which corporate pay structures have become untethered from performance, particularly in banking. It is neither desirable nor possible for the Government to remedy the situation; it is up to shareholders. Barclays must be just the beginning.

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