Shareholder Rage at Bank Pay Reaches Tipping Point

Agenda-Setting Financial Insight.
April 27 2012 5:06 PM

Shareholder Rage at Bank Pay Reaches Tipping Point

122178973
Almost a third of shareholders at both Credit Suisse and Barclays failed to support their bank’s remuneration reports at annual general meetings on April 27.

Photo by Hunter Martin/Getty Images

Bank investors’ anger at bank pay is boiling over. Less than two weeks after a third of Citigroup shareholders threw the company’s remuneration report back in its face, shareholders at Barclays and Credit Suisse have done exactly the same. Reforms that now flow from what is a genuine “shareholder spring” could be far reaching.

Barclays only has itself to blame for its embarrassing protest vote. Chief Executive Bob Diamond described 2011 returns as “unacceptable”, but then proceeded to be granted 80 percent of his maximum 3.4 million pound bonus. It prompted one irate shareholder at the bank’s annual general meeting in London on April 27 to sum it up thus: Barclays, he said, was a cow milked for its officers and staff.

Advertisement

Yes, Barclays did extend a belated olive branch to investors just prior to the meeting, offering to withhold half of Diamond’s bonus if returns did not exceed the cost of equity. That prevented an even worse result. But Barclays clearly did not give enough ground. Taken with the fact that the same anger surfaced at Credit Suisse - if anything seen as an innovator on remuneration - investors seem to have simply come to the conclusion that executive pay is too high.

If so, it could mark the start of a new regime, one in which bank bosses are held to account by those best placed for the task - shareholders. At Barclays’ AGM, chairman Marcus Agius trotted out the familiar line that banks need to pay the market rate. But with investors clearly willing to flex their muscles, boardroom concern about angry shareholders could act as a more powerful counterveiling force.

Yet even as shareholders ensure that they, rather than employees, get a fairer share of the available returns, bankers’ pay may continue to attract attention. It might be different if banks could be allowed to collapse by devising proper resolution regimes, and economies were not likely to be driven into recessions as a result. As things stand, governments and taxpayers must still pick up the tab when banks go bust, and customers suffer because bank oligopolies are not subject to genuine competition. Governments, taxpayers and customers may want their pound of flesh too. 

Read more at Reuters Breakingviews.

TODAY IN SLATE

Foreigners

The World’s Politest Protesters

The Occupy Central demonstrators are courteous. That’s actually what makes them so dangerous.

The Religious Right Is Not Happy With Republicans  

The XX Factor
Oct. 1 2014 4:58 PM The Religious Right Is Not Happy With Republicans  

The One Fact About Ebola That Should Calm You: It Spreads Slowly

The Feds Have Declared War on New Privacy Measures From Apple and Google

These “Dark” Lego Masterpieces Are Delightful and Evocative

Crime

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Europe’s Next Digital Commissioner Thinks Keeping Nude Celebrity Photos in the Cloud Is “Stupid”

Piper Kerman on Why She Dressed Like a Hitchcock Heroine for Her Prison Sentencing

  News & Politics
Politics
Oct. 1 2014 7:26 PM Talking White Black people’s disdain for “proper English” and academic achievement is a myth.
  Business
Moneybox
Oct. 1 2014 2:16 PM Wall Street Tackles Chat Services, Shies Away From Diversity Issues 
  Life
Outward
Oct. 1 2014 6:02 PM Facebook Relaxes Its “Real Name” Policy; Drag Queens Celebrate
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 1 2014 6:39 PM Spoiler Special: Transparent
  Technology
Future Tense
Oct. 1 2014 6:59 PM EU’s Next Digital Commissioner Thinks Keeping Nude Celeb Photos in the Cloud Is “Stupid”
  Health & Science
Science
Oct. 1 2014 4:03 PM Does the Earth Really Have a “Hum”? Yes, but probably not the one you’re thinking.
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?