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Sparks fly at Barclays AGM as shareholders grill execs

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  • 27/04/2012
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Sparks fly at Barclays AGM as shareholders grill execs
There were fiery exchanges at Barclays’ AGM today, as shareholders grilled CEO Bob Diamond over his pay packet, the PPI mis-selling scandal, and the value of the bank’s shares.

Shareholders accused Diamond of “bringing the bank into disrepute”, and driving it into bankruptcy, the Telegraph reports.

The chief executive was awarded a £17m payout for 2011, although the terms of his remuneration were revised last week in an attempt to appease angry shareholders.

Alison Carnwath, the head of the remuneration committee at Barclays, was heckled by investors as she tried to explain the link between executive pay and shareholder returns.

“Managing remuneration is a critical element of delivering returns to shareholders,” she said. “We realise not all our shareholders agree. The balance of rewards between employees and shareholders has to change.”

The bank’s chairman Marcus Agius defended Diamond‘s (pictured) performance against his targets, in the face of events outside his control, such as the eurozone crisis.

However, he also apologised for the bank’s failure to communicate well around the issue of executive pay. “There is a significant minority of shareholders who feel that we got some of these judgements [on remuneration] wrong for 2011 and that we have not sufficiently taken their views on board,” Agius said.

“For this I apologise and I assure you that in the future we will be engaging differently and more purposefully with shareholders in order to ensure that we obtain a broader level of support on remuneration policy and practice.”

When another investor asked how the bank could justify paying bonuses when the share price is below 250p, Agius said not awarding bonuses is “simply not an option” and would have “dire commercial consequences”.

Meanwhile on the thorny issue of payment protection insurance mis-selling, one shareholder asked if any Barclays staff had lost their bonus over the scandal, the Guardian reports.

Agius confirmed this was the case, and that some staff were no longer with the firm, while Diamond added: “I can assure you the impact of PPI has reduced remuneration. I tell you very very sincerely that this is what we mean by citizenship.”

Barclays shares were trading 4.51% higher at 222.6p by 1.30pm.

Paul Mumford, senior investment manager at Cavendish Asset Management and shareholder in Barclays, said investors should remember the bank has put in a “decent showing” over the past few years in terms of rescues and profits so remuneration related to performance in this case may be justified.

“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 the long-term interest of the business.

“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 is “moderation” he added.

“Taking an analogy: shareholders should not want the chief executive of a large financial organisation to be like a football manager, just looking for short-term results in return for an excessive remuneration, but instead like the director of a football academy; paid less but building for the future.”

 

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