Barclays Poised To Back Down Over Pay Plans

Mark Kleinman, City Editor
Barclays Poised To Back Down Over Pay Plans

Barclays is expected to bow to demands by leading investors to revamp plans for a new pay scheme as it seeks to avoid reigniting a long-running feud over the remuneration of its top employees.

Sky News has learnt that several institutional investors have urged Barclays to alter a new role-based allowance for senior staff so that it is paid in shares instead of cash.

The shareholders have said that plans mooted by the bank to award share allowances to only its chief executive and chief financial officer do not go far enough.

"We want this money to be paid in stock rather than cash, potentially for all of those who will receive it," one major Barclays investor said.

Barclays is expected to heed investor concerns by expanding the pool of those who receive the role-based allowances in shares, although it may attempt to restrict the number only to those on its executive committee, who also include its chief risk officer, its heads of investment banking and its human resources director.

Several hundred Barclays staff will be eligible for the role-based pay under new European rules that come into effect this month. That number is likely to be smaller following a decision to tighten the definition of senior risk-takers within European banks.

The regulations are designed to curb excessive pay for bankers by restricting to a maximum of 200% of base salary - or 100% without shareholders' permission - the bonuses that individuals can be paid.

Pay awards for 2013 which will be decided in the coming weeks are not affected by the new rules.

Sources say the reforms would not have an inflationary effect on overall pay at Barclays because the new third chunk of remuneration would be factored in to deliberations over annual bonuses for senior staff.

Under one scenario outlined by a leading Barclays investor, a senior executive in its investment bank could be paid a basic salary of £750,000, a maximum bonus - with shareholder approval - of £1.5m, and a sum running to hundreds of thousands of pounds paid in monthly installments.

Barclays and other UK banks such as HSBC have argued that the European Union rules will inhibit their ability to compete with rivals, with some institutions complaining that staff are already being poached by non-EU rivals.

"One of the key questions to the banks is that as part of the uncertain bonus is shifted into a more certain payment then what discount should be applied to the more certain third element," said one investor when Sky News revealed Barclays' plans in October.

"There are also a lot of questions on how the new third element is determined and how much transparency shareholders will get on this."

The issue of transparency will be particularly crucial since banks have been ordered to disclose more information about how much they pay their top staff.

Hundreds of thousands of City bankers are likely to be caught up in the EU remuneration rules, and other banks are also understood to be planning structures similar to that being discussed at Barclays.

Bankers' pay is already subject to rules relating to the proportions that can be paid in cash and shares, and much of it has had to be deferred for at least three years under reforms introduced in the aftermath of the financial crisis.

Last summer, the Parliamentary Commission on Banking Standards proposed a 10-year deferral period for senior bankers' pay in order to encourage a greater focus on long-termism in the City.

The Treasury, which last autumn mounted a legal challenge to Brussels' efforts to impose a maximum two-for-one bonus/pay ratio, is being kept informed about the plans of each of the major lenders.

The UK banks will ask shareholders to vote at next year's annual general meetings on a resolution to allow them to pay up to twice the level of base salaries to senior staff as annual bonuses.

Barclays is particularly anxious to avoid a new row over pay following the confrontations that dogged Bob Diamond's tenure as chief executive of the bank.

Antony Jenkins, the current chief executive, said last week that high pay was a necessary feature of competing in many of the business areas in which Barclays has a presence.

Barclays, which raised nearly £6bn from selling new stock last year, declined to comment on talks with shareholders about the new role-based allowances.

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