Members will recall that Lloyds gave frontline managers an extra day off and a family takeaway for their efforts in managing staff during the early stages of the pandemic. Whilst the bank was being dragged kicking and screaming into making such a paltry award, Mr Horta-Osorio, Group Chief Executive, and his fellow executives, were trousering millions in ‘windfall gains’ on the back of the falling the Lloyds share price. I think we can safely assume that Mr Horta-Osorio won’t be spending his ‘windfall gain’ on a Domino’s double deal for four with extra wedges!

Mr Horta-Osorio like all members of the GEC and other senior executive is entitled to a fixed share award. It’s really just an additional payment on top of his basic salary and it’s not performance related. He gets it regardless of how well the bank performs. That fixed share award is worth £1,050,000. Mr. Chalmers, the Group Finance Officer, gets £504,000 a year. Following the settlement of tax and national insurance, those fixed share awards are converted into Lloyds shares and distributed quarterly to executives.

So far this year Mr Horta-Osorio has been awarded 1,443,511 ordinary shares in three tranches. He will get the fourth tranche of shares in December. If we multiply the number of shares awarded to Mr Horta-Osorio by the average acquisition price paid by the bank (1,443,511 shares x 29.449p) then those shares cost £425,821 to buy. Those shares were purchased at a time when the Lloyds share price was falling because of the economic consequences of the pandemic and the ban on paying dividends.

And now, suddenly, there is hope. As a result of new vaccines, we can now see light at the end of the coronavirus tunnel. The Government will almost certainly lift the dividends ban in the next few weeks and one can reasonably expect much of the decline in the Lloyds shares price to be reversed. At the beginning of the year, Lloyds shares were trading at 63.71p each. At that level, Mr Horta-Osorio’s fixed award would be worth £919,660 (1,443,511shares x. 63.71p).

£493,839 ‘Windfall Gain’ For Doing Nothing

So, Mr. Horta-Osorio has potentially made a ‘windfall gain’ of £493,839.

Even if we take the share price just before we went into the first lockdown, Mr. Horta-Osorio is still making a ‘windfall gain’ of £252,629. And let’s not forget, he’s still got one more tranche of shares to go this year. He could end up being £658,452 better off.  Yet he’s done nothing to deserve it.

In a presentation earlier this week, Mr. Stuart ‘Antonio Is A Charismatic Winner’ Sinclair, Chairman of the LBG Remuneration Committee, said that: “Share price will be considered in making awards; the methodology for managing potential ‘windfall gains’ will be disclosed”.  What have the Remuneration Committee done to manage the ‘windfall gains’ from fixed share awards? Nothing, it would appear.

To profit from a pandemic in which 50,000+ people have died either directly or indirectly is just wrong. Mr Horta-Osorio could reasonably argue that he’s done nothing wrong and it’s not his fault the share price tanked before he was given his fixed share awards. That’s true, but that doesn’t mean he should simply trouser the money. He could commit now to give the ‘windfall gain’ to charity.

Over to you Antonio and the other senior executives who have profited this year.

Members with any questions should contact the Union’s Advice Team on 01234 262868 (choose Option 1).

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