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

Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

There Are New Abuse Allegations Against Adrian Peterson

After This Merger, One Company Could Control One-Third of the Planet's Beer Sales

John Oliver Pleads for Scotland to Stay With the U.K.

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

Jurisprudence

Don’t Expect Adrian Peterson to Go to Prison

In much of America, beating your kids is perfectly legal. 

The Juice

Ford’s Big Gamble

It’s completely transforming America’s best-selling vehicle.

I Tried to Write an Honest Profile of One of Bollywood’s Biggest Stars. It Didn’t Go Well.

Here’s Why College Women Don’t Take Rape Allegations to the Police

The XX Factor
Sept. 15 2014 1:51 PM Here’s Why College Women Don’t Take Rape Allegations to the Police
  News & Politics
Weigel
Sept. 15 2014 8:56 PM The Benghazi Whistleblower Who Might Have Revealed a Massive Scandal on his Poetry Blog
  Business
Moneybox
Sept. 15 2014 7:27 PM Could IUDs Be the Next Great Weapon in the Battle Against Poverty?
  Life
Outward
Sept. 15 2014 4:38 PM What Is Straight Ice Cream?
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Tv Club
Sept. 15 2014 11:38 AM The Slate Doctor Who Podcast: Episode 4  A spoiler-filled discussion of "Listen."
  Arts
Brow Beat
Sept. 15 2014 8:58 PM Lorde Does an Excellent Cover of Kanye West’s “Flashing Lights”
  Technology
Future Tense
Sept. 15 2014 4:49 PM Cheetah Robot Is Now Wireless and Gallivanting on MIT’s Campus
  Health & Science
Bad Astronomy
Sept. 15 2014 11:00 AM The Comet and the Cosmic Beehive
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.