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Barclays Says 27% of Investors Voted Against Pay Package

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Barclays Plc Chief Executive Officer Robert Diamond
Barclays Plc Chief Executive Officer Robert Diamond. Photographer: Simon Dawson/Bloomberg

April 27 (Bloomberg) -- Barclays Plc was hit by an investor protest over pay as 27 percent of shareholders voted against Chief Executive Officer Robert Diamond’s 12 million-pound ($19.5 million) compensation package.

Those opposed failed to block the bank’s remuneration plans as more than 73 percent of investors who voted supported it, London-based Barclays said in a statement after its annual investor meeting today. About 10 percent voted down Barclays’s pay plans last year.

The bank triggered criticism from investors that it was enriching employees at the expense of shareholders while failing to meet its own profitability targets. Diamond, 60, has himself called the bank’s return on equity last year “unacceptable.” Chairman Marcus Agius apologized for failing to communicate the firm’s pay plans to investors more clearly.

“At a time when share price performance is poor, dividend payouts are weak and management itself is saying that performance isn’t acceptable, for the CEO to be getting paid such large sums of money is hard for shareholders to stomach,” said Gary Greenwood, an analyst at Shore Capital in Liverpool, who rates Barclays a hold. “Shareholder activism has clearly been increasing of late and, particularly in the banking sector, there’s a demand that pay is aligned with performance.”

The Barclays vote comes less than 10 days after Citigroup Inc. shareholders rejected its executive pay plan amid criticism it let CEO Vikram Pandit collect millions of dollars in rewards too easily. About a third of Credit Suisse Group AG investors who voted today opposed the bank’s remuneration report.

‘Has to Change’

“The balance of rewards between shareholders and employees has to change in favor of shareholders, Alison Carnwath, chairman of the board committee responsible for pay at Barclays, said at the meeting today. “We will continue to seek to push down remuneration levels in the context of the competitive environment.”

About 21 percent of investors who took part opposed Carnwath’s reappointment as a director, the second-biggest vote to go against Barclays today.

Pensions Investment Research Consultants Ltd., the U.K. corporate governance advisers, urged Barclays shareholders on April 10 to oppose the pay package because it provided “rewards for failure.” Barclays said in February it may fail to hit its 13 percent target for ROE by 2013 after it fell to 6.6 percent in 2011.

‘Humiliating for Barclays’

“This vote is humiliating for Barclays and will cement its reputation as a bank that just doesn’t get it when it comes to concerns about excessive pay,” Alan MacDougall, managing director of PIRC, said in a statement after the result. PIRC advises investors with about 1.5 trillion pounds of assets.

Diamond and Finance Director Chris Lucas last week agreed to cut their deferred bonuses for 2011 until the bank improves profitability in an effort appease investors. The concession is worth about 11 percent of Diamond’s 12 million-pound compensation for last year.

Diamond got as much as 6.3 million pounds in salary, bonuses and stock awards for 2011 as well as a 5.75 million-pound contribution toward his personal tax bill.

“It is not an option to pay zero bonuses unilaterally,” Agius said today. Barclays has “very talented people we have to reward,” he said. “We have not done a good enough job in articulating our case,” Agius told investors today. “For this I apologize, and I assure you that in the future we will be engaging differently and more purposefully with shareholders.”

Barclays rose 4.7 percent to 223.1 pence in London trading today, for a market value of about 27 billion pounds. The stock has climbed 27 percent this year, making it the best performer among Britain’s five biggest banks.

“We are five years into the credit crisis and we are still having this debate,” said Bruce Packard, an analyst at Seymour Pierce Ltd. in London with a hold recommendation on Barclays. “The management are making all the right noises, but their actions suggest they are living on a different planet.”

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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