ALEX BRUMMER: Board perks in the firing line once again

| March 30, 2012 | 0 Comments

By
Alex Brummer

15:47 EST, 30 March 2012

|

16:15 EST, 30 March 2012

Barclays escaped fairly lightly when it released its remuneration report a fortnight ago.

But over the past couple of weeks, institutional investors have been crawling all over the Barclays pay report and the indications are they are unhappy. Chairman Marcus Agius could face an uncomfortable ride at the annual meeting.

The biggest criticism I have been hearing is of the decision by the board to pay Bob Diamond’s £5.7m tax liability arising from his move from New York back to the UK.

Barclays boss Bob Diamond

Biggest criticism: Barclays board have decided to pay chief executive Bob Diamond’s tax liability arising from his move from New York back to the UK

What has aggravated investors is the failure to quantify the scale of potential liability in the 2010 pay report.

Moreover, the payment was listed as a
benefit, and institutional investors believe pay committees and chairmen
are exploiting benefits as a means of rewarding executives in less
scrutinised ways.

In the case of Diamond, in addition to
the tax payment (which it is feared could be a precedent), the benefits
also included a relocation allowance together with a payment for the
chief executive to get advice on his personal financial affairs.

It has always seemed to me to  be
bizarre that one of the most skilled financiers in the world, working
for an organisation known to be aggressive in sorting out other people’s
tax affairs, should need such advice.

Furthermore, when Diamond returned to
New York, post the Lehman takeover, it was his own personal choice – for
family reasons – and he could just have easily remained in London.

So why should shareholders foot the bill when an executive makes a such a choice?

The broader point is that institutions
have the benefits loophole in their sights. In the past we have pointed
out some of the most egregious of these at other companies, including
first-class air fares for nannies and the overgenerous clothing
allowances for Burberry’s top echelons.

But the really big worry for
institutions is the pensions loophole used by companies to top up final
salary schemes that have often been closed to almost everyone except top
executives.

Boardroom perks are being seen as out
of control. It used to be the case that if companies were performing
well then shareholders were generally willing to turn a blind eye. It is
encouraging there now appears to be a determination to tackle the
loopholes through which investor money is escaping.

Wrong battle

Now that the Treasury has admitted to
its weaknesses in handling the 2007-2009 financial crisis, joining the
Financial Services Authority in the dunces’ corner, pressure is growing
on the Bank of England to do the same.

Certainly, there are no shortage of
critics of the Bank’s role, including Alistair Darling in his memoirs
Back From The Brink and the Treasury Select Committee’s own series of
reports.

In the past this was just the kind of
job for the long-forgotten Board of Banking Supervision, which among
other things was responsible for the forensic official inquiry into the
1995 collapse of Barings.

This board, comprising three bank
executives – the governor Robin Leigh-Pemberton (now Lord Kingsdown),
his deputy the late Lord Eddie George and the head of regulation Brian
Quinn and six independents – was swept away by the act which created the
Financial Services Authority.

The reason for reminding people of this bit of history is it has relevance to the current debate about Bank oversight.

The present governor Sir Mervyn King
is arguing for an oversight committee of the Court from which Bank
executives are excluded, arguing that it is daft for directors to pass
judgment on themselves.

The Treasury Select Committee, on the
other hand, wants a supervisory body that uses a mixture of executives
and independents, just like the Board of Banking Supervision.

It is a bit of a theological debate but history suggests that King might be fighting a battle that is not worth winning.

Kinky Knickers

Mary Portas’s ideas for reviving the High Street are fascinating but hardly rocket science.

The Queen of Shops has discovered something far more important with her venture into restoring Britain’s manufacturing base.

Her Kinky Knickers enterprise, has
brought life back to a textile factory in the Manchester suburb of
Middleton and shows what has long been denied – that it is possible to
repatriate making things to the UK from the Far East, make the supply
chain shorter, create jobs and sell at a profit.

The pride of ‘Made in Britain’ still
counts for something among the nation’s post-recession consumers, who
have seen hard times and don’t like it.

Fashion retailers such as MS and Topshop could really learn something from the Portas experiment.

Filed Under: finance news

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