Barclays investors wary over bonus plan

The bank has said it wants to link the rewards of senior executives and bankers to its capital strength in a new pay structure that enables it to claw back bonuses if a key ratio falls below a healthy level.

But investors are irritated that senior employees could be paid annual interest of seven per cent on part of their deferred bonuses – on top of their original award – in return for that risk, when the bank’s dividend yield is less than two per cent.

A top 30 investor who is going to vote against the plan said: “If you’re going to give a synthetic instrument that is giving them seven per cent and ranks preferential (in the capital structure) to the dividend, that is going to raise eyebrows.”

The bonuses are typically deferred for three years, meaning a £100,000 cash bonus could end up costing Barclays £121,000.

A second top 30 investor initially commended the deferred bonus scheme as a creative approach to pay that encouraged prudent risk-taking among staff but he has switched sides after seeing the generous terms of the scheme.

“If the capital threshold were higher then it might be something to think about. But there are sufficient concerns for us to not wholeheartedly endorse it.”

Barclays needs to keep its core Tier 1 capital ratio above seven per cent for the awards to pay out. Its ratio is currently above 10 per ent.