Barclays has announced that it is to put conditions on the long-term bonuses paid out to its chief executive Bob Diamond and finance director Chris Lucas following strong criticism from its shareholders.
The new conditions will affect the 2011 remuneration packages announced for each last month after Barclays announced that both Mr Diamond and Mr Lucas had “volunteered” to link their 2011 pay to the new rules.
Under the new agreement 50 per cent of the deferred bonus awards from 2011 onwards will not be paid unless Barclays overall equity return outstrips its cost of equity. The 2011 deferred share bonus awarded to Mr Diamond was for £2.7 million. This would be paid at £900,000 each year from 2012-2014. If the return on equity target of 13 per cent is not met then £450,000 of this each year would not be paid.
However, a spokesman at Barclays confirmed that if the return on equity target was met in 2014 even though it may have not been met in 2012 and 2013, then Mr Diamond would still receive the full deferred sharebonus of £2.7 million.
In the remuneration package announced last month for 2011, the deferred bonus awards are agreed to pay out shares over the next three years. However, if the return on equity is not deemed sufficient within three years from the date of the award then Mr Diamond and Mr Lucas will not receive 50 per cent of the deferred share bonus.
In a statement from Barclays pledged to improve returns on equity. It said: “Barclays regards the returns produced in 2011 to be unacceptable on an absolute basis, even though they were strong on a relative basis. Barclays has taken, and continues to take, measures to improve returns. Barclays remains firmly committed to delivering a 13% return on equity as soon as possible.”
The announcement comes ahead of Barclays annual meeting next Friday (April 27th) and is designed to diffuse tensions between the bank and some shareholders. It has been reported that more than ten per cent of Barclays shareholders, including leading institutional shareholders Scottish Widows and Standard Life were planning to vote against the compensation report and the re-election of the chairman of the remuneration committee, Alison Carnwath.
A statement from the bank said: “Recognising the strength of opinion expressed by some shareholders Bob Diamond and Chris Lucas have volunteered to subject their 2011 bonus awards to a further condition: that one-half of their deferred bonus award that may vest in each year will not pay out until Barclays return on equity exceeds its cost of equity and, if that condition is not met, the potential pay out caught by it will be subject to lapse if it is not met within three years from the date of the award.”
Investors have also expressed their disquiet about the £5.7 million tax equalisation payment made to cover Mr Diamond’s tax bill following his move to the UK in January 2011 to take on his current role.
The statement added that the bank aims to distribute more to shareholders in dividends.
It said: “Barclays is fully committed to ensuring that a greater proportion of income and profits flow to shareholders.
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