Barclays Shareholders Think Ethics, Bonuses

Barclays shareholders this week wasted no time in criticizing both the new management and the exceptional bonuses that the many receive. They say they’re not convinced those big bonuses are going to be abandoned as the bank uses words like “ethical focus”. Meanwhile, the bank’s CEO Antony Jenkins said it would take time to see the benefits of the pay overhaul.

Go To Bank

Seems as though not many are convinced, though, and the shareholders are quite vocal in their skepticism,

‘Go-To’ bank? Go to hell Barclays. I don’t understand why anyone needs 1 million pounds and anyone who asks for more is a greedy bastard. The banks have brought us down, brought the whole economy down,

said Joan Woollard, 75, who bought five shares of the financial entity just so she could attend the annual meeting. Those words were applauded and soon, many others began chiming in. Another short timer with a small investment insists pay restraints are little more than “shams” and uses proof of some resignations due to ethical differences to make her point.

Jenkin’s predecessor, Bob Diamond who resigned last year seems to be the focus and in fact, not many believe the new CEO either. Even though Jenkins promised to overhaul the bank’s standards and operations policies, he’s not getting much support. He insists he’s doing his best to make it the “go to” bank of choice while developing a more open and transparent relationship with both bank regulators and their customers. He says he plans to be more accessible. The recent scandals, including LIBOR, product misrepresentation and those whopping bonuses are troublesome and in fact, much of it spilled over into U.S. banks – especially the LIBOR scandal. There’s no doubt – if Barclays was once the luxury bank in the world, those days are long gone, even if it does have the support of many investors.

Banker Bashing

In fact, it’s likely his plan to revamp the bonus structure will be passed, thanks to those investors.

We were originally thinking about abstaining on the remuneration report but I personally thought that as they are moving in the right direction, that we would support them, and if they don’t continue to change, we will vote against them,

said one top-20 investor, who asked not to be identified. He continued,

That sends the right message without encouraging more banker bashing. That does need knocking on the head because it has gone on for way too long.

Jenkins insists it could take a few years before investors and shareholders begin seeing a return from their investments. He insists that his decisions to close profitable businesses and fire thousands of people “might not be what people want to hear, but it’s realistic”. Time will tell.

Barclays’ cost of equity is currently 11.5 percent.

The bank’s shares were down more than one percent this week when the bank announced its investment banking was behind the the profits in the first quarter. The investment side of the bank is being significantly pared back as part of his reforms, too.

Salz Report

Earlier this month, though, a new report was released by a lawyer, Anthony Salz. He provided insight on nearly every aspect of the business model. It should be noted that Barclays paid him to complete the report. According to Salz, the fast transformation from domestic lender to a more universal bank created a “sprawling set of businesses”, and with each one, the emphasis was placed on profit “even at all costs”. He also pointed out that the 70 top executives at Barclays received bonuses that were consistently above average and that politicians who pointed out that paying 428 of its employees one million pounds or more in 2012 had a significant point.

Salz used this report to reiterate his focus of reining in both salaries and bonuses. Meanwhile, the collective bank said that its remuneration committee acknowledges that changes will take time and that the “path to reposition our remuneration is a multi year journey”. It went on to say that it continues to look for better proposals and options for its highest earners. It also said it was focused on a more simple and transparent awards policy for payment structures.

Pay Cuts

The shareholders are the ones he ultimately has to answer to and they’re already saying they’re on alert. But they too aren’t happy with their pay cuts, especially considering that multi million dollar bonus paid out to the head of the investment bank last month, Rich Ricci, who Jenkins wasted no time in pushing out. In the meantime, Ricci isn’t doing much to endear himself to the media or the public. Recently frustrated by criticism, he donned his overpriced broad rimmed felt hat, loud checkered suit and went to watch his racehorse that he named “FatCatInTheHat”. It’s easy to understand why folks are buy small shares and considering it small payment to be able to voice their disdain to the bank.

Those cuts the shareholders shoulder are down two percent from a year ago and ultimately, Jenkins is aiming for 35 percent. He chose not to take a bonus last year, though he did receive a package worth 2.6 million pounds, including shares awarded under a long-term incentive plan. To contrast it, his predecessor, Diamond, took home 17 million pounds in two years ago. Still, there are those who say Diamond should have been kicked out long ago.

The question is, will the public assertiveness be an incentive for Americans and big daddy bank CEOs here who are determined to do away with new financial laws? Time will tell, but if Barclays is any proof that it can work, there may be something for these financial leaders to keep in mind. Remember, Mitt Romney had the support of most all of the nation’s biggest banks last year as he sought to take over the White House. That was because he promised to do away with both the new financial laws, including the 2010 CARD Act as well as the Consumer Financial Protection Bureau. He lost and the bankers have been trying to find another way out ever since.

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