Shareholder anger simmers worldwide over bankers' pay

Thu May 29, 2014 11:02am EDT
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By Steve Slater

LONDON (Reuters) - Investors owning almost 6 billion shares rejected the pay plans of 10 of the world's biggest banks in recent weeks as anger over excessive bonuses reached record levels in Britain and jumped sharply from a year ago in the United States.

Hefty bankers' bonuses have been blamed for contributing to the 2008/09 financial crisis and banks have since changed pay structures, but many politicians, shareholders and members of the general public say the industry has not gone far enough.

"While some changes in behavior are taking place, these are not deep or broad enough. The industry still prizes short-term profit over long-term prudence, today’s bonus over tomorrow’s relationship," Christine Lagarde, the managing director of the International Monetary Fund, said this week.

Shareholder opposition to executive pay at five European and five U.S. banks averaged 17.5 percent at their annual meetings in April and May, according to Reuters' analysis of votes.

That was up from an average of 9.5 percent across the same 10 banks last year, but was slightly down from the record rebellion of 19.2 percent of votes in 2012.

Opposition at British banks this year hit record levels, led by 41 percent of shareholders at Standard Chartered voting against its executive pay plan. At Barclays more than one-third of voters failed to back its plan, including abstentions.

Eugenia Jackson, head of governance at F&C Investments, which has 82 billion pounds in assets under management and voted against remuneration reports at Barclays, HSBC, UBS and others, said lower revenues and profits in investment banking and tougher capital requirements had put even more scrutiny on how banks plan to adapt pay levels.

"It's an even bigger concern than it was before because we are now coming to the realization that the old business models have to change, and as a result they have to rethink the compensation," Jackson said.   Continued...

International Monetary Fund Managing Director Christine Lagarde addresses the Bretton Woods Committee annual meeting at World Bank headquarters in Washington May 21, 2014.  REUTERS/Jonathan Ernst