This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Barclays – Who benefits?

Barclays Bank announced their final results yesterday. The results did not match expectations and the shares fell 4% on the day. The national media led with the story that the company had still increased the bonus pool even so, and that the company now pays out more in bonuses than it pays in dividends to shareholders.

The CEO, Antony Jenkins,  gave the usual excuse for the high pay levels – that they need to compete on the international scene for top class bankers and hence had to match their competitors. Overall bonuses rose by 10% in Barclays. The performance of the investment banking arm was particularly disappointing, but even so bonuses rose there by 13%.

On the issue of pay at Barclays, there was an amusing, if not perhaps to shareholders, interview with the former head of their Remuneration Committee published earlier in the week. She explained how she opposed Bob Diamonds pay awards prior to the 2012 AGM in that Committee, but was overruled by all the other directors. They did however present a united front at the AGM and she said in the interview that “Defending something you didn’t believe in, that was very uncomfortable“. Not uncomfortable enough to make her resign to avoid doing so apparently.

Some might ask why she did not resign immediately rather than face the embarrassment of defending the indefensible. Why did she need to wait until June that year to resign? Perhaps the remuneration she received of £158,000 for her role as at Non-executive at Barclays in 2011 might have given her second thoughts?

But she did get a subsequent reward for holding the line at the AGM – she was made a Dame in the New Years Honours List in 2014. Or was it for finally blowing the whistle on past events and then resigning?

What returns does the company generate for shareholders? The answer is 3.1% for the return on average equity based on “adjusted” profits. The return on assets is an even more miserly 0.5% (that’s actually based on a “risk-adjusted” figure for assets, without that adjustment it’s 0.2%).

These are of course truly abysmal figures and promises of improvements in performance seem to be tardy in arriving. It probably means they are frittering away their capital in real terms. In 2013 the bank paid out £859m in dividends compared to a staff bonus pool of £2.4bn. The IOD called on shareholders to take a more aggressive role in the governance of the bank and ensure there is an independent head of the Remuneration Committee.

But it is clear that changing the culture of mega-banks such as Barclays is something “Saint Anthony”, as some call him apparently, is not finding an easy task. In ShareSoc’s view the existing operations of Remuneration Committees and Nomination Committees need to be radically changed in such companies, but there seems little political will to take the required steps. ShareSoc has made specific proposals for suitable cures. But perhaps there are too many people on the existing gravy-train.

Roger Lawson

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