Barclays condemned over
£2.4bn bonuses
Payouts up 10% despite
profits fall and job cuts
Bank's boss says he cannot control market-led pay
Jill Treanor
The Guardian, Tuesday 11 February 2014 / http://www.theguardian.com/business/2014/feb/11/barclays-hikes-bonuses-profits-slide
Barclays faced condemnation on Tuesday after announcing a
10% rise in bonus payouts despite a dramatic fall in profits and plans to cut
12,000 jobs this year.
The bank's new boss, Antony Jenkins, came under intense
pressure after being accused of failing on promises made only a year ago to
clamp down on pay and change the culture of the bank after its £290m fine for
rigging Libor.
The TUC accused the bank of "sticking two fingers up to
hard-pressed families across Britain", while the Unite union was furious
at further cuts at the retail bank, which could harm customer service.
But the harshest words came from the Institute of Directors,
whose corporate governance director Roger Barker asked "for whom is this
institution being run?" after the bank paid out £2.4bn in bonuses but just
£860m in dividends to shareholders. The bank disputes that figure, but refused
to say exactly how much it is paying out to shareholders, which has been
complicated by last year's £5.8bn rights issue, forced upon Barclays by the
Bank of England to boost its financial strength.
The main investor body, the Association British of Insurers,
refused to respond to Barker's accusation that investors were
"supine" in failing to control pay at Barclays.
The position of the bank's chair of remuneration committee
Sir John Sutherland – appointed to the role only 18 months ago – was also
questioned. Sunderland is entering his 10th year on the board, after which he
is technically no longer deemed independent.
The total bonus pay for 2013 is £2.4bn – up from £2.2bn a
year ago. Within that, the investment bankers enjoyed bonuses of £1.6bn
compared with £1.4bn a year ago, even though their division suffered a loss in
the fourth quarter and its annual profits tumbled 37%. Profits across the
group, which also includes high street banking, Barclaycard and operations in Africa,
fell 32% to £5.2bn.
On a statutory basis – including accounting quirks and other
one-off items – the profits were higher, at £2.9bn.
Frances O'Grady, general secretary of the TUC, said:
"Barclays has stuck two fingers up to hard-pressed families across Britain
by announcing another multibillion-pound bonus pool." Labour said its
bonus tax should be reintroduced.
Jenkins, who has waived his own £2.7m bonus, insisted he had
the support of shareholders for the higher bonuses, which had to be paid because
he had no control over market-led pay. He also insisted the bank was acting
within the "spirit and letter" of the law by paying monthly
"allowances" to key staff who might otherwise face pay cuts as a
result of the new EU cap on bonuses, which will limit payouts next year to 100%
of salary, or 200% if shareholders approve.
"We employ people from Singapore to San Francisco. We
compete in global markets for talent. If we are to act in the best interests of
our shareholders we have to make sure we have the best people in the
firm," Jenkins said.
The average bonus per member of staff, across the bank, is
£17,000, up from £15,600. However, the average payout in the investment banking
operation is £60,100, up from £54,500 – including payouts to low level and
administrative staff. The bonuses to the highest paid staff will be revealed
next month when the bank publishes its annual report. Last year, it handed more
than £1m to 428 of its bankers.
Jenkins said 820 senior roles – or 10% – would be cut. He
also disputed concerns about the impact of job cuts on customer service. Seven
thousand of the 12,000 job cuts will be in the UK but not all in the high
street.
"The reason why we're doing this is not because we're
trying to deliver poorer customer service, actually quite the reverse.
Customers can now do their banking when its convenient to them, not … us.
Technology allows [us] to reduce headcount," said Jenkins.
There was no programme for branch closures, he said, but
conceded the 1,700-strong network was changing.
Vince Cable, the business secretary, said: "We need a
responsible banking sector [that] rejects the bonus-fuelled culture of the past
and puts the needs of consumers and businesses at the heart of what they
do."
Andrew Tyrie, chairman of the Treasury select committee,
said Barclays' shareholders needed to ask if the pay was justified by the
bank's returns to shareholders.
Even the presentation to City analysts was dominated by
questions about bonuses and the investment bank. "Analysts were
"perplexed" and "disappointed" by the investment bank pay
rises," said independent analyst Louise Cooper.
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