Lloyds Former Chief Daniels to Forfeit 40% of Bonus After Insurance Losses
Stock Chart for Lloyds Banking Group PLC (LLOY)
Lloyds Banking Group Plc (LLOY)’s former chief executive officer, Eric Daniels, will lose 40 percent of his final bonus as he and 12 other current and former executives were penalized for improper sales of insurance products.
Daniels, 60, will lose about 580,000 pounds ($920,000) of his 1.45 million-pound bonus for 2010, Lloyds said in a statement today. All the reductions apply to their deferred stock payouts.
Tim Tookey, Lloyds’s finance director, Truett Tate, the head of the wholesale unit, Helen Weir, the former head of the retail bank, and Archie Kane, the bank’s former group insurance director, will have 25 percent of their 2010 bonuses clawed back, according to a person familiar with the matter who declined to be identified because the individuals’ names weren’t made public. The reductions follow the bank’s decision to set aside 3.2 billion pounds for loan-insurance sales practices that were found improper by regulators.
The other eight people affected by the decision, members of the bank’s group executive committee, will have their bonuses cut by 5 percent.
“The bonus pool for 2011 will reflect a further reduction” as the insurance provision “will affect all individuals eligible to be considered for a discretionary bonus for that year,” Lloyds said in the statement. “The board wishes to emphasize that its decision is based entirely on the principle of accountability, and in no way on culpability or wrong-doing by the individuals concerned.”
It’s the first time clawbacks have been applied to U.K. bank board members since the policy was agreed on by Group of 20 leaders in Pittsburgh in September 2009. Inappropriate sales of payment protection insurance, used to cover payments on credit cards and mortgages in case of illness or unemployment, will push Lloyds into a 2.6 billion-pound net loss for 2011, according to data compiled by Bloomberg.
Kane was in line to receive a bonus of 767,000 pounds, Tate a payment of about 1 million pounds, Tookey 942,000 pounds and Helen Weir 875,000 pounds, according to the bank’s 2010 annual report.
Daniels stepped down as CEO of Lloyds in February last year and remained on the payroll until September. In 2008, he led the bank’s takeover of HBOS Plc, the U.K.’s biggest mortgage lender, whose losses led Lloyds to cede a 41 percent stake to the government and seek a taxpayer-funded bailout of more than 20 billion pounds.
Lloyds Chairman Win Bischoff said in June that the lender had had “no occasion” to consult Daniels since he left the CEO’s post, even though he remained on the payroll.
Lloyds is scheduled to report its full-year results on Friday. Last month, Lloyds CEO Antonio Horta-Osorio said he was turning down his 2011 bonus to reflect the bank’s performance and his nine-week absence last year for exhaustion.
Customers who bought PPI rarely compared prices and terms or switched providers and usually weren’t aware they could buy it from a firm other than their lender, the U.K.’s Competition Commission has said. The mis-selling of PPI is “likely to lead to a redress” of 9 billion pounds across the industry, Financial Services Authority CEO Hector Sants said in June.
To contact the reporter on this story: Gavin Finch in London at email@example.com
To contact the editor responsible for this story: Edward Evans at firstname.lastname@example.org
Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.