In a statement released today, Barclays said chief executive Diamond and group finance director Chris Lucas have agreed that half of their deferred bonus will not be paid to them until returns on equity at the business exceed cost of capital.
Barclays said: “One-half (50%) 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 payout caught by it will be subject to lapse if it is not met within three years from the date of the award.”
The change, done ahead of the group’s AGM to defuse shareholder anger, means Diamond’s £2.7m bonus could fall to £1.35m, while Lucas’ £1.8m package could also be halved.
The target itself is someway off. Barclays said today its current cost of equity is 11.5%, while its return on equity is just 6.6%.
Barclays has acted to appease shareholders following a tough 2011 which saw profits fall 3%.
Standard Life, Aviva and Scottish Widows were believed to be considering voting against the remuneration report or the re-election of the chair of the remuneration committee at the AGM later this month.
Barclays added in the statement: “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.”
Standard Life publicly welcomed the change in the remuneration agreement today.
In a statement Guy Jubb, global head of governance and stewardship, said: “We are pleased that our key concerns over last year’s executive bonuses have been addressed.
“The decisions demonstrate that robust stewardship engagement by long-term institutional investors does work, especially when it is undertaken in a ‘comply or explain’ governance environment.
“The result is a much better alignment with pay for performance than was initially proposed. Barclays have responded constructively to our concerns and we now intend to support the remuneration report at next week’s AGM.'”
