Institutions oppose Barclays’ executive bonuses

Thumbs_down_410Barclays, the banking group, re-ignited the debate about executive pay and risk taking last week with a number of pension fund representatives voting against the firm over remuneration.

F&C, a London-based fund manager that votes shares on behalf of institutional investors, and Pirc, a corporate governance agency,  were two that voted against the proposed remuneration package at the Barclays annual general meeting, held last week.

Some 31.5% of shareholders did not vote for the remuneration package when deliberate abstentions were included, while the chairwoman of the Barclays remuneration committee, Alison Carnwath, failed to get the backing of 22.5% of investors who voted.

Following the Friday AGM, George Dallas, F&C’s corporate governance director, said: “We voted against the remuneration report because we do not believe the remuneration committee exercised sufficient discretion by granting substantial bonus awards for a year in which the company’s performance was mixed.

“We remain concerned about the shift in the balance between staff pay and shareholder dividends in recent years, and believe there to be an imbalance in the remuneration to company staff and returns to shareholders.”

Dallas said the lack of support for the remuneration plan was a “significant statement of investor concern” about the company’s remuneration practices and he called on the board to clarify its interpretation of the vote and say how this may affect the company’s future remuneration practice.

Paul Mumford, senior investment manager at Cavendish Asset Management, said Barclays had “put in quite a decent showing” with its performance over the last few years, had avoided state rescue, and its profits reported last week were very reasonable.

“Nonetheless the point remains that remuneration should always be carefully designed to align the interests of the worker with the interests of the shareholders and thus the long-term interest of the business,” he said.

Mumford added: “The problem with sky-high pay deals at the top is that they can run the risk of incentivising short-term risk taking over a few years, rather than long-term business building over the span of decades. Payment in shares can be a good way of aligning interests, but even this can become excessive and have the reverse effect.  The key here is moderation, as with much in the world of finance.”

Fund managers M&G and Fidelity also reportedly opposed the remuneration report.

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