BARCLAYS made a peace offering to its angry UK shareholders yesterday by inserting a new condition into the bonuses awarded to its top executives and saying it would prioritise raising its dividend.
Chief executive Bob Diamond and chief financial officer Chris Lucas will now see only half of their 2011 bonuses if they do not manage to get the bank’s return on equity above its cost of capital, a key measure of whether the company is creating or destroying economic value.
Last year, its returns were just 6.6 per cent, whereas the cost of the resources it used to generate them was 11.5 per cent. Diamond has set a target of 13 per cent for returns.
The bonus change only applies to £2.7m of Diamond’s total pay package last year and £1.8m of Lucas’ pay, however, because much of their pay is already deferred over years and conditional on returns. There was no change to the £5.7m tax equalisation award paid to Diamond that had shocked some investors.
But the bank said it is in the process of “rebalancing” so that “a greater proportion of income and profits flow to shareholders”. It said it would deliver “further progress over time” to increase its dividend.
The bonus change, coupled with a major charm offensive by Diamond, was enough to placate Standard Life, which owns two per cent of the bank. The shareholder’s head of governance, Guy Jubb, credited its “robust stewardship” for the move, saying Standard Life will now vote in favour of Barclays’ remuneration report at its shareholder meeting next week.