The rage of Caliban

27 March 2017 By George Hay Follow @gfhay

Barclays and Standard Chartered’s bosses will get bonuses even if their banks don’t earn back their cost of equity. Unstretching targets, though, reflect the fact neither lender has said when it will start making an economic profit. Paying less won’t bring that moment closer.

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Shareholders are complaining about new variable compensation arrangements for UK banks, the Financial Times reported on March 26.

“Executives will be paid when the bank is effectively losing money,” one top-15 shareholder in Standard Chartered told the Financial Times, referring to the bank’s 2017 to 2019 long-term incentive plan (LTIP).

Two of Britain’s top asset managers told the Financial Times they were “relaxed” and “understanding” about the changes banks had made to bonus plans.

Standard Chartered’s 2017 to 2019 LTIP, outlined in its 2016 annual report, requires the bank to make a return on equity of at least 5 percent to start paying out. A return on equity of 8 percent is required for the maximum payout to be achieved.

Previously, the corresponding targets were 7 and 10 percent.

Barclays’ 2017 to 2019 LTIP has a threshold of 7.5 percent return on tangible equity, with 9.5 percent return on tangible equity – a measurement that strips out factors like goodwill from acquisitions – to hit a maximum payout.

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Context News

Shareholders are complaining about new variable compensation arrangements for UK banks, the Financial Times reported on March 26.

Two of Britain’s top asset managers told the Financial Times they were “relaxed” and “understanding” about the changes banks had made to bonus plans.

Previously, the corresponding targets were 7 and 10 percent.

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