Barclays faces institutional investor unrest over its pay arrangements for chief executive Bob Diamond and other top executives at the annual gene-ral meeting on Wednesday.
Co-operative Asset Management will vote against the bank’s remuneration report and will be joined by a number of big City fund managers.
The Co-op’s opposition is significant because of the group’s focus on corporate governance and because it has been in close contact with Barclays over the revamped pay arrangements. The fund manager supports the new pay plan but objects to a £5m payout to Mr Diamond that it says was triggered by income from the forced sale of Barclays Global Investors in 2009.
Phineas Glover, corporate governance analyst at Co-operative Asset Management, said: “We very much welcome the consultative approach taken by Barclays and following extensive dialogue we are able to support the new share schemes, which represent a big improvement.
“However, as a result of various decisions made in 2010 regarding remuneration we are unable to support the remuneration report this year.” The main move the Co-op opposes is the decision to grant Mr Diamond share awards for 2007 to 2010 – a period in which Barclays’ shares slumped to 50p and sharehol-ders were diluted by equity issued to new investors from the Middle East to shore up Barclays’ capital base.
Mr Glover said Mr Diamond would not have been awarded shares for that period if not for the sale of BGI – a deal that netted him a profit of £16m on his BGI shares. Mr Glover added: “The remuneration committee had the opportunity to demonstrate it could apply the discretion entrusted to it in both ways. We find it inappropriate that management have benefited significantly across a period when shareholders were hugely impacted.
“It was a highly questionable decision to use income from a forced sale of a subsidiary as the basis for gran-ting share awards.”
The Co-op’s opposition will be a blow to Barclays after the bank’s efforts to convince shareholders it has taken account of concern about how it rewards top executives. Barclays has changed the measures it uses to judge executive directors’ long-term incentive payouts by replacing total shareholders returns with return on risk-weighted assets, loan loss performance, customer satisfaction and relations with regulators.
But some City investors remain unconvinced by the new arrangement and will also vote against the remuneration report. Aviva Investors is a long-standing opponent of Barclays’ pay arrangements and is likely to oppose the measures, which include a 20 per cent salary increase for Mr Diamond over his predecessor John Varley.
A fund manager at another institutional investor with a significant stake in Barclays said the move away from measuring performance by the share price weakened the link between the interests of investors and management. “The issue with having remuneration linked to other measures is that these measures may or may not be the right ones over time. We would like to see alignment with the share price,” the fund manager said.
Pirc, the governance adviser, has also recommended voting against the pay report and the Association of British Insurers has given it an “amber” warning. Yet, a big shareholder revolt over the report is unlikely and asset managers voting against ack-nowledge they are in the minority.