Barclays Shareholders Vent Frustration Over Bonuses

LONDON - For nearly three hours on Thursday, shareholders of Barclays aired their grievances with the British bank’s top management, ranging from complaints about the security of debit cards to the length of the lines to get into its annual meeting.

But one sentiment was nearly universally expressed by the 20 or so shareholders who took the floor in a testy back-and-forth with Barclays executives and directors: employees at its investment bank are paid too much.

Barclays has faced intense scrutiny in recent weeks over its decision to increase the bonus pool for last year even as the bank had a steep loss in the fourth quarter.

On Thursday, one shareholder said the board’s compensation committee should be “sacked,” and questioned why anyone would need more than 1 million pounds (about $1.68 million) a year in compensation. Another asked why the bonus pool was two-and-a-half times larger than the bank’s dividend payment to investors.

David Walker, the Barclays chairman, defended the decision to increase the bank’s overall compensation pool, saying Barclays faced “very aggressive” competition from its rivals to attract and retain talent, particularly in the United States.

“We were faced last year, 2013, with a situation in which we were losing people who were crucial to the future of the investment bank in an extremely competitive environment in which total pay in some parts of the major U.S. investment banks rose by 15 percent or more,” Mr. Walker said.

“We saw significantly higher numbers of high quality people we wanted to recruit turning down our offers,” he continued. “In this situation, where there is a genuine threat to the health of the franchise, our duty of care is to protect value for shareholders. The challenge was the need for damage limitation and franchise protection.”

In February, Barclays reported a big fourth-quarter loss of £514 million, which was driven in part by restructuring costs and a £331 million charge for litigation and regulation penalties.

But despite that loss, the bank increased its pool for bonuses and other incentives to £2.4 billion in 2013 from £2.2 billion the previous year. That remained £1.1 billion lower than it was in 2010.

Banker bonuses have been a sore topic for politicians and the public, particularly since taxpayers injected billions of dollars into Barclays’ rivals in Britain during the financial crisis.

Barclays’ reputation suffered in 2012 after it became the first bank to settle with American and British authorities over manipulation of global benchmark interest rates, including the London interbank offered rate, or Libor. It paid $450 million in penalties.

Nearly a quarter of the votes cast at the annual meeting on Thursday were against the company’s compensation plan. Every other resolution on the agenda passed by more than 90 percent.

Shareholders repeatedly expressed their frustration on Thursday with the company’s compensation policies, particularly in light of the problems in recent years.

“We appreciate that there were competitive pressures during 2013, particularly in the investment banking business,” Alison Kennedy, the governance and stewardship director at Standard Life Investments. “Nevertheless, we are unconvinced that the amount of the 2013 bonus pool was in the best interests of shareholders, particularly when we consider how the bank’s profits are divided amongst employees, shareholders and ongoing investment in the business.”

John Sunderland, a director and the chairman of the bank’s remuneration committee, said the board made the difficult decision to increase compensation because Barclays was facing an “exodus of talent.”

Mr. Sunderland, who will have served on the Barclays board for nine years in June, has been a target among shareholders unhappy with the bank’s compensation practices. He is expected to step down as a director after the company’s 2015 annual meeting.

The bank is in the middle of a painful restructuring and plans to eliminate as many 12,000 jobs this year, or about 8 percent of its work force. Barclays is to provide an update on its business plan and expected changes within its investment bank on May 8.

“The future for Barclays will be as a strong, focused, international bank. And the investment bank will be an important part of that mix,” Antony P. Jenkins, the Barclays chief executive, said on Thursday. “A strong investment bank in Barclays is good for the business, good for shareholders and good for Britain.”

But that investment bank is likely to be smaller in the future, as Barclays focuses on higher-return, less risky businesses.

Mr. Jenkins pointed to the decision by Barclays to exit the physical commodities business as an example of an area where the bank was refocusing the use of capital.

The first quarter is likely to be another challenging one for Barclays, which is to announce results on May 6.

Mr. Jenkins said that the challenging trading environment in the second half of last year continued in the bank’s fixed income, currencies and commodities business in the first quarter, with “a significant year-on-year reduction” in income in the business. But, he said the company’s efforts to control costs helped offset lower income in that business.

Mr. Walker, the Barclays chairman, said the bank remained committed to reducing its compensation expense ratio as part of the overhaul, but said it might have gone a bit too far in trimming its bonus pool in recent years.

Mr. Walker said the bank faced stiff competition for employees last year from rivals in several business lines it considers crucial to its future. As an example, Mr. Walker said rivals tried to poach two-thirds of the bank’s bond trading desk in New York last year.

That did little to sway a group of vocal shareholders, who jeered one shareholder seeking to praise the bank’s management for its efforts to change the culture at Barclays.

“We are paying for Manchester United, but we are getting Colchester United,” another shareholder said.