Agm season heralds showdowns with company shareholders

Barclays Bank faces bonus backlash while Tesco reports second year of decline

 Barclays headquarters in Canary Wharf, London. The bank can expect a rough ride at its meeting next week after paying out £2.4 billion in bonuses last year.   Photograph: Chris Ratcliffe/Bloomberg

Barclays headquarters in Canary Wharf, London. The bank can expect a rough ride at its meeting next week after paying out £2.4 billion in bonuses last year. Photograph: Chris Ratcliffe/Bloomberg

Wed, Apr 16, 2014, 01:00

The agm season is upon us and companies are scrambling to get their houses in order before engaging in their annual showdown with shareholders.

That’s easier for some companies than others. Barclays, for example, can expect a rough ride on pay at its meeting next week after shelling out £2.4 billion (€2.9 billion) in bonuses last year. This was despite a fall in profits of more than 30 per cent.

Barclays boss Antony Jenkins has defended the payments, insisting they were vital if the bank was to avoid what he called a “death spiral”, as high-earning employees defected to more generous rival banks.

It’s not the first time Barclays has faced a pay protest – in 2012 more than a third of investors failed to back its remuneration report amid anger over the then chief executive Bob Diamond’s £2.7 billion bonus.

And last year, investors attending the meeting at London’s Royal Festival Hall were greeted by some colourful demonstrations outside the concert venue, including a protester in a bath, waving wads of cash.

In an attempt to head off this year’s threatened revolt, the Barclays board has moved to replace the head of its remuneration committee, Sir John Sunderland, who has been on the board for 10 years. The new man is Crawford Gillies, a City veteran who serves on the boards of Standard Life and Mitie Group.

Gillies joins the Barclays board on May 1st, and so will escape the pay protests at the bank’s agm a week tomorrow. But Barclays is likely to be disappointed if it thinks the new appointment will allow it to escape a row over pay.


Institutional anger
The shareholder advisory group Pirc had already advised shareholders to block Sunderland’s re-election as head of the remuneration committee. That won’t be an issue now, as Barclays has made clear he will be vacating that position, and most likely resigning from the board too, later in the year. Gillies will take over as head of the pay committee once a smooth transition can be assured, the bank said yesterday.

Institutional anger on bonuses at Barclays has been stoked by the fact that, at £2.4 billion, they are almost three times the amount shareholders are receiving in dividends. Let’s not forget, those same shareholders were asked to stump up £6 billion in a cash call last year, after regulators demanded the bank plug a shortfall in its capital.

There is anger too at the new “role-based allowances” which the banks – not just Barclays – are using to circumvent new EU rules restricting bonuses to 100 per cent of pay, or 200 per cent with shareholder approval. Jenkins is in line to receive a role-based allowance of almost £1 million on top of his salary and various share awards.

Will investors be able to expect a tougher line on pay from Gillies when he takes over? That’s far from clear – a look at his track record on such matters shows that, as head of Standard Life’s remuneration committee, he approved £10 million of bonuses for three of the financial services group’s directors last year.

There was, however, a big difference between the Standard Life bonuses and the Barclays payments – Standard Life met its performance targets and its chief executive was not forced to apologise to shareholders for a series of misdeeds that have cost the business billions.


Tesco decline
If he wants to keep his job as head of Britain’s biggest retailer, Phil Clarke had better have some glimmers of hope for shareholders today as he report’s Tesco’s second consecutive year of decline.

The supermarket group is expected to turn in profits of £3.2 billion, a 6 per cent fall on the previous year, when profits tumbled by 13 per cent. Tesco shares have fallen to a 10-year lows as it struggles to stem the decline in its core UK operation.

Ahead of the results, Tesco announced it was making a return to the US just months after offloading its disastrous Fresh & Easy grocery chain. This time, it is pinning its hopes across the Atlantic on its F&F clothing business, and is planning to open seven stores on the east coast in conjunction with an American franchise partner.

F&F already operates in almost two dozen countries around the world and is a very different proposition from grocery stores. But the announcement of a return to the States so soon after the Fresh & Easy debacle has unsettled some Tesco followers, who would far rather Clarke and his team concentrate their full attention on turning round the UK. They will be hoping for some signs of that from the Tesco chief today.

Fiona Walsh is business editor of theguardian.com

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