Monday, April 9, 2012

Leading investor group says Barclay's Bob Diamond should not be paid a bonus 'at all'

A Telegraph article reported on Pension & Investment Research Consultants' call that shareholders should vote against "any bonus at all" for Barclay's Bob Diamond.

Pensions & Investment Research Consultants (Pirc) has advised institutional shareholders and pension funds to vote down Barclays’ remuneration report, claiming the pay plan is inappropriate given the performance of the bank. 
In its detailed advice to shareholders, seen by The Daily Telegraph, Pirc argued: “In view of the fact that Barclays’ shares are trading far below net asset value, we cannot think of any circumstances in which a chief executive who was part of a team when the bank got into this predicament should be receiving any bonus at all, indeed the board should also be considering clawbacks itself.” 
The strongly worded note adds to the views of some of Barclays’ biggest investors who are already planning to vote down the bank’s remuneration report. 
The Sunday Telegraph revealed Standard Life, Fidelity, Aviva and Scottish Widows are preparing to protest against the pay of Mr Diamond... 
Investors who argued that Barclays’ 6.6pc return on equity in 2011 was “unacceptable” have voiced concern over pay and bonuses at the bank at meetings in recent weeks....
In the absence of ultra transparency, it is impossible to evaluate how Barclay's actually performed and determine if a bonus is merited.

Remember, at the start of the financial crisis, regulators adopted regulatory forbearance and suspension of mark-to-market accounting.  So long as the financial regulators are blessing hiding losses on and off the balance sheet, it is impossible to determine how well Barclay's did at generating earnings to offset these losses.

With ultra transparency, market participants could assess exactly how well Barclay's is performing and award a bonus that reflects this performance.
Barclays has often argued that its pay schemes should not be criticised in the same way as those of the Royal Bank of Scotland or Lloyds Banking Group because it was not rescued with taxpayer funds. 
However, Pirc said: “Although the bank has not failed in the classic sense, trading below net asset value is an investment failure from the perspective of the shareholders.”
Actually, without ultra transparency and Barclay's disclosing its current asset, liability and off-balance sheet exposure details, there is no way of knowing that it did not fail in the classic sense.

A share price trading below net asset value suggests that market participants are skeptical about Barclay's net asset value and whether it is solvent or not. 

No comments: