The Spring attracted significant media attention, and it is important to highlight for the current chapter, as the initial incident of open rebellion came at the AGM of a financial institution, Barclays PLC. Historically shareholders have very rarely interfered with institutions and AGMS were often reduced to a box ticking exercise, so much so that it lead one minister to accuse shareholders of behaving like ‘absentee landlords.’114 So why then did shareholders suddenly decide to revolt against
director remuneration?
The Shareholder Spring so dubbed by a number of news agencies had its beginnings much earlier. Following the financial crisis the level of executive remuneration continued to grow at an alarming rate. Rises in executive remuneration had outstripped employee remuneration by nearly three times year on year in the lead up to the global financial crisis.115 During the same period of time BIS also
noted that CEOs in the UK earn over 120 times that of the average worker.116 In 2009 it was
observed that basic salaries of executives of the FTSE 100 companies were still increasing by as much as 10% notwithstanding the fact that at that time the global recession had taken full effect, with
114 Kate Burgess, ‘Myners urges ‘absentee landlord’ shareholders to be more involved’ Financial Times (22 April 2009) accesses at http://www.ft.com/cms/s/0/6633de06-2ed7-11de-b7d3-
00144feabdc0.html#axzz35ac2FYRh [accessed on 5 September 2014].
115 BIS, Executive Remuneration: Discussion Paper (September 2011) para 13-22 which noted on average employee earnings grew 4.7% per year over the past 12 years, compared to 13.6% for FTSE 100 CEOs. 116 ibid para 2.
187 | P a g e their companies losing up to one third of their value.117 In 2009 for example, the Marks and Spencer
CEO Sir Stuart Rose’s pay package increased from £1.375 million to £1.765 million at the same time the company posted a pre-tax fall in profits of 40%.118 What is interesting is that it is not just the
banks that have seen these failures with remuneration packages. Chelsea Building Society had their strength rating cut despite their CEO Peter Walsh still earning £522,000. Newcastle Building Society was also downgraded in 08-09 although the company directors were still paid a total of £1.1
million.119Leading reports at the time were warning that levels of high pay were ‘corrosive’ to the UK
economy,120the High Pay Commission highlighted astronomical increases in executive pay over the
years, using Barclays as an example, showing that CEO remuneration had increased by nearly 5000% in 30 years while average wages during the same period had increased just threefold.121The same
report showed that in 2010 the average FTSE 100 executive earned 145 times the average worker.122
In its final report the commission stated that ‘excessive top pay is deeply damaging to the UK as a whole’. Very clearly showing underlying issues brewing prior to the Spring. These worries were reiterated by government, a study by BIS in 2010 showed that between 1999 and 2009 FTSE 100 CEO remuneration rose annually by 13.6% on average whilst an average annual increase in the FTSE 100 index of 1% was observed.123 These and other reports led Vince Cable, the Business Secretary, to
opine that:
‘In the last decade we have seen extreme increases in top executive pay which appear to be completely unrelated to the performance of companies. They are therefore acting against the interests of shareholders and consumers.’124
Moving into 2011, during a time of pay freezes and mass redundancy programmes, studies suggested that 80% of Chief Executives still received some form of pay rise.125 This continued into
2012 whereby the first grumbles by institutional investors were given voice. The ‘Accountability in
117 Julia Finch and Simon Bowers, ‘Executive pay keeps rising, Guardian survey finds’ The Guardian (14
September 2009) accessed athttp://www.theguardian.com/business/2009/sep/14/executive-pay-keeps-rising [accessed on 4 September 2014].
118 Sathnam Sanghera, ‘Business Life: M&S rubber chicken should go bouncing back’ The Times (8 June 2009). 119 ibid.
120 High Pay Commission (n60). 121 ibid.
122 ibid.
123 BIS, A Long term focus for Corporate Britain – a call for evidence (BIS/10/1225, October 2010) para 5.5. 124 As quoted in Allegra Stratton, ‘High executive pay ‘corrosive’ to the UK economy, report warns’ The
Guardian (London, 22 November 2011) accessed at
http://www.theguardian.com/business/2011/nov/22/high-executive-pay-corrosive-economy [accessed on 4 September 2014].
125 KPMG, ‘KPMG’s Guide to Directors’ Remuneration 2012’ (KPMG, 2012) 2 accessed at www.kpmg.com [accessed on 4 September 2014].
188 | P a g e Business’126 report found that 95% of all institutional investors that were questioned believed that
pay was too high across all major companies including financial institutions. The same report also highlighted that 83% of all institutional investors when questioned stated that there should also be arrangements to ‘claw back’ pay. In 2012 it was reported that the average CEO salary amounted to just over £3M.127 During the same time, the European Banking Authority published data128 showing
that during 2012 the UK had the largest amount of ‘high earners,’ defined as those people whose pay package totals at least EUR1 million,129 in all EU member states. Totalling 2,714 individuals their
average total remuneration per individual was a staggering £1,951,572. However this also includes 1272 persons who are defined as ‘identified staff’130 which includes ‘Executive members of the credit
institution or investment firms’ corporate bodies, depending on the local legal structure of the institution.’131 If this is compared to other major European nations, it can be observed that France
for example had only 177 high earners, of which 121 were identified staff. And Germany had 212 people who met the threshold with 146 of these being identified staff. These figures were exacerbated by high profile media accounts of so called ‘reward for failure’ reports spanning the major news broadcasters. Examples include coverage of a top banker at Barclays was handed a £9m leaving deal following his resignation after the LIBOR scandal. 132 And Barclays own CEO Bob
Diamond, and his ‘windfall’ £14M pay package.133 It is important to note that neither Barclays, nor
the financial sector as a whole, were alone in their criticism as other industries have faced similar criticism134 over the same period. All of this evidence collectively can be seen to be generating an air
of negativity towards directors generally, and also more specifically towards directors of financial institutions. In the small piece of anecdotal evidence above we can see that the UK had nearly 10x as many identified staff as Germany who were earning such significant pay packages.
126 The Share Centre, ‘Accountability in Business.’ (April 2012) accessed at
http://blog.share.com/2012/04/13/a-step-too-far-in-executive-pay/10558 [accessed on 4 September 2014]. 127 KPMG (n 126) 3.
128 EBA, ‘EBA Report High Earners Data 2012’ (EBA, 2012) accessed at
https://www.eba.europa.eu/documents/10180/16145/EBA+Report+High+Earners+2012.pdf [accessed on 4 September 2014].
129 EBA, ‘Guidelines on the data collection exercise for High Earners’ (EBA, 2012) 4.1 accessed at
https://www.eba.europa.eu/documents/10180/107643/EBA-GL-2012-05---GL-5-on-remuneration-data- collection-exercise-_1.pdf [accessed on 4 September 2014].
130 The definition of identified staff can be found in the CEBS, ‘CEBS Guidelines on Remuneration Policies and Practices’ (2010) accessed at https://www.eba.europa.eu/-/cebs-guidelines-on-remuneration-policies-and- practices [accessed on 4 September 2014].
131 ibid para 16.
132 Jill Treanor, ‘£9M leaving deal for Barclays deputy Jerry del Missier’ The Guardian (26 July 2012). 133 Jill Treanor, ‘Barclays prepares to apologise over handling of Bob Diamond’s pay’ The Guardian (26 April 2012).
189 | P a g e
Barclays and the April Revolt
As the first AGM of the new season there were early rumours and grumblings that there may be shareholder pressure on the Barclays board to amend their remuneration decisions, in light of recent financial difficulties.135 It was believed that some shareholders would use the AGM to express their
dissatisfaction to what appeared to be overly generous managerial remuneration packages, reportedly only as many as 10% of the total shareholder total vote would seek to make a point, however what came next was not expected by many.
On 27th April 2011 Barclays bank held their annual AGM,136 it was here that the first shots were fired
as shareholders were asked to vote to approve the Barclays Bank remuneration report for 2011. 27% of total votes cast opted against the approval of the report, with this number increasing to 32% if deliberate abstentions were taken into account.137 This was far greater than the original 10% that
was envisaged and sent shockwaves throughout the financial sector,138 there was an open outcry
from shareholders during the AGM, who accused the directors of allowing ‘excessive’ and ‘obscene’ payments to some of their major directors.139 The disgruntlement became so apparent that Barclays
chairman Marcus Agius issued a public apology over the handling of the then CEOs £17m pay package. 140 The level of shareholder dissatisfaction was further emphasised during voting for
director re-election, and in particular during the re-election of Alison Carnwath the chairman of the remuneration committee and the person who sanctioned the pay deals of the executives. When put to the vote 20% voted against her re-election, 24% if deliberate abstentions were taken into
account.141 The rebellion was a massive shock to the board and the sector as a whole. So much so
that soon after those at the top paid the ultimate price. Within three months of the April AGM both
135 Jill Treanor (n 134).
136 Marcus Agius, ‘Barclays PLC Notice of Annual General Meeting: Message from the Group Chairman (Barclays, 2011) accessed at http://reports.barclays.com/ar10/files/pdfs/barcar10_notice.pdf [accessed on 4 September 2014].
137 Including abstentions 2578739714 out of 8192444820 shares see Barclays PLC ‘Barclays Annual Report’ (2012) accessed at
http://www.barclays.com/content/dam/barclayspublic/docs/InvestorRelations/PrivateShareholders/2012AG M/poll-results.pdf [accessed on 4 September 2014].
138 Harry Wilson and Andrew Trotman, ‘Barclays AGM: as it happened: April, 2011’ The Telegraph (London 27 April 2011).
139 ibid.
140 Marus Agius, ‘Barclays 2012 AGM Chairman’s Statement’ (April 2012) 4 accessed at
http://www.barclays.com/content/dam/barclayspublic/docs/InvestorRelations/PrivateShareholders/2012AG M/agm-statements.pdf [accessed on 4 September 2014].
190 | P a g e the CEO, Bob Diamond, and chairman of the remuneration committee, Alison Carnwath, had resigned.142