We understand that the Board of Lloyds Banking Group is considering following the lead of Barclays Bank which recently became the first British bank to announce that it was scrapping the cap on executive bonuses.
Barclays’ new bonus policy means that the top 1500 employees – called ‘material-risk takers’ – will now be able to earn as much as ten times their fixed pay.
Greed Is Not Good
That the Lloyds Board would even contemplate such a move shows just how out of touch it is with the needs of staff.
The standard bonus award for Grades A-E staff is just 5% of basic pay but the Board is considering giving its most senior executives bonuses worth up to 10 times their basic salaries. That is morally repugnant. And let’s face it, these very senior executives are paid enormous salaries anyway. The cost-of-living crisis will have passed these people by!
And the Lloyds Board has form when it comes to looking after the interest of senior executives, while doing little for ordinary staff. A few years ago it refused to give staff bonus awards despite Lloyds making a pre-tax profit of £1.2bn but instead gave them a measly £400 worth of shares. We subsequently found out that executives had trousered millions in share options.
Members will recall that the bonus cap – which limited variable pay for senior executive to two times their fixed pay – was introduced by the European Union in 2014 in response to the financial crisis of 2007-9, when the world economy nearly crashed.
When the bonus cap was introduced, all the UK banks and financial institutions including Lloyds got round it by introducing free shares for senior executives. This year the free fixed share awards for Mr Charlie Nunn, Group Chief Executive and Mr William Chalmers, Chief Financial Officer, are worth £1,092,000 and £524,160 respectively. All members of the GEC and some senior executives get similar free fixed share awards which are released over a three-year.
Banks need to attract and retain talent in senior jobs so no-one is opposed to high salaries for high performers (i.e. shareholders get value for money) but that is not how the Lloyds scheme works.
What do these senior executives have to do to get such awards? Absolutely nothing. In fact, I was going to write “just turn up to work” but they don’t even have to do that. As a result of Brexit, the cap was scrapped last year and although Lloyds said originally that it would keep the cap, we understand that decision is being reviewed.
In addition, Barclays has said that its executives will keep the fixed share awards as well as being able to earn variable bonuses worth up to ten times their basic salary.
The Lloyds bonus cap, which is still allows very lucrative awards for senior executives, should not be removed under any circumstances. In fact, the Board should consider getting rid of the free shares for senior executives or, at the very least, make them performance related with complete transparency.
Members with any comments or issues they would like us to deal should contact the Union’s Advice Team on 01234 262868 (choose Option 1).