Barclays faces bonus outcry and commodities protests at today’s AGM

Investors question pay and bonuses at UK bank annual meeting.

Barclays, the UK banking giant, has been accused of failing to disclose the true cost of bonuses paid to top staff, as shareholders of the bank meet in London today for what is likely to be a heated annual general meeting (AGM). Investors have already voiced concerns about the bank’s 2010 pay report, which includes a £27m total pay and bonus package for Bob Diamond, the bank’s Chief Executive. And in advance of today’s AGM, PIRC, the London-based proxy voting agency, which advises many UK institutional investors, said the bank’s 2010 accounts showed it had not paid £116m of bonus tax liabilities it believes the bank should have done by the end of 2010. For its part, Barclays says it is staggering the bonus tax payments between 2009 and 2013. The UK government passed a special bonus tax regime from December 2009 to April 2010. It gave Barclays a tax liability of £437m on bonuses of approximately £4.8bn. Barclays’ report and accounts say the bank paid £225m of the levy in 2009, £96m in 2010 and will pay the remaining £116m between 2011 and 2013. However, PIRC says this skews the way that profit in the bank is divvied up between employees and shareholders. It said: “Typically 50% of investment bank profit goes to employees with the remaining 50% going to the shareholders who carry the financing risk. Therefore leaving out such a material sum is obscuring that fact that the balance of reward between the risk-bearing shareholders and insiders is even less favourable than appears from the accounts.” PIRC claimsBarclays shares are trading at a discount to stated net asset value as a result because of concerns over the bank’s accounting policies. The voting agency said Barclays could also be running foul of the UK Companies Act, which requires total staff costs, including bonuses, to be booked in the accounts in the year on which they fall. PIRC has recommended that investors vote against the Barclays remuneration report. The Association of British Insurers, whose members own almost 15% of investments listed on the London stock market, has also issued an ‘amber top’ warning to flag up concerns over Barclays’ pay plans. The ABI is questioning the terms of contingent convertible bonds known as “cocos” scheduled to be paid to key bankers, traders and executives as a form of long-term incentive alongside shares and cash. The investors say a 7% annual premium tagged to the cocos outstrips current Barclays shareholder dividends.
At least one institutional investor, Co-operative Asset Management, has said it plans to vote against the bank’s remuneration report.
Meanwhile, Barclays faces protests at the AGM from NGOs. Campaign group, the World Development Movement, claims the bank’s trading arm, Barclays Capital, is pushing up the price of food staples. Murray Worthy, policy officer at the World Development Movement said: “First, it was sub-prime mortgages, now it is food commodities. Along with others in the sector, Barclays is able to make unchallenged profits by betting on hunger.” The WDM estimates BarCap may have made as much as £340m in 2010 from its activities in food speculation.