Barclays' Grimstone Favors Deferrals as Bank Can't Slash Pay

  • Grimstone says cutting pay would threaten London as center
  • Deputy chairman says banks could defer stock for 10 years

Barclays Plc Deputy Chairman Gerry Grimstone said he favors withholding bankers’ bonuses paid in stock for up to a decade to improve accountability, though London’s status as a global financial hub would be hurt if compensation was cut too much.

“I’m a huge supporter of share-based remuneration,” Grimstone, 66, said at a conference in the British capital on Tuesday. He would prefer “moving to a system where a large part of variable remuneration are shares that you hold in the organization for five years or 10 years. When you do that, management’s time horizon extends.”

Banker pay and shareholder returns have been under scrutiny in the wake of the financial crisis amid weak returns from investment banking and as firms seek to fix scandal-tarnished reputations while retaining the best staff. Barclays Chairman John McFarlane has said that the “game is over” for high pay at the expense of investors.

Grimstone said banks are constrained by the need to retain top employees in a global market. The City of London, the capital’s financial district, could lose its place as a global business hub if British lenders “unilaterally” cut pay in half, he said. 

“You wouldn’t have global banks operating out of London,” were pay reduced below the levels of other financial centers, he said. “If you don’t have global banks operating out of London, then you don’t have the City of London.”

The former investment banker and chairman of Standard Life Plc, who joined Barclays in January, said banks sought “profits for their own advantage” before the financial crisis and that securities units became “entirely market focused” at the expense of clients and shareholders. 

“Sometimes you have to shout louder in investment bankers ears than you would for normal staff to get them to do things,” he said. “When I was a managing director you told staff what to do and they did it. Those days have to come back.”

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