Barclays share price: Bank criticised for bonus pool increase

on Feb 12, 2014
Updated: Apr 9, 2020
Listen Wednesday, February 12: Barclays share price declines on lower 2013 profit), is facing widespread criticism after it announced plans to cut 12,000 jobs this year while raising the bonus pool.

As of 08.27 UTC today, Barclays’s shares were trading 3.67p or 1.39 percent lower at 261.03p.
Shareholders, unions, politicians and even the Institute of Directors have united in opposition to Barclays’s decision to ramp up the bonus pool for its investment bankers. Despite a 37 percent decline in investment banking profits, the bank plans to give the division’s personnel a 13 percent increase in bonuses.

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City investors have voiced their concern over the bank’s decision, wondering how could there be such a rapid rise in pay while dividend distribution remained flat. Last year investors injected ₤6 billion of extra capital into the bank to help alleviate regulators’ concerns.
One top 20 Barclays shareholder was quoted by The Independent as saying: “The strongest message we will be giving the company is that it needs to narrow the disparity between returns to staff and the returns to shareholders…We’ve been badgering them about this for some time now and are not happy with the current situation.”

The Institute of Directors also voiced its opinion: “[It] cannot be right in any business for the executive bonus pool to be nearly three times bigger than the total dividend payout to the company’s owners….We would like to see shareholders take a more aggressive role in the governance of the bank.”
Shareholder dividends amounted to ₤859 million in 2013, compared to a bonus pool for last year of ₤2.38 billion. This translates into a dividend-to-compensation ratio of 2.77, a slight improvement on 2012’s 2.98, when the bank paid ₤733 million to its investors and ₤2.17 billion in bonuses.

Separately, Barclays says that it intends to cut between 10,000 and 12,000 jobs this year, of which 7,000 will be in the UK and more than 800 will be senior managers.

Barclays’ full-year results revealed that the bank continued to struggle to generate a return on shareholder equity, which was just one percent in 2013 compared with a cost of equity of 11.5 percent. CEO Jenkins has said that he hoped to improve returns so that in two years the bank would make a greater return than its cost of equity.

Jenkins also vigorously defended the decision to raise bonuses, arguing that it was the best way to attract and retain talent. “We need to recruit people from Singapore to San Francisco. We need the best people in the bank to drive long-term sustainable returns for our shareholders,” the chief executive asserted.
“I understand that there will be some who feel that this decision is the wrong one for Barclays. But it is the decision of the board and myself that this entirely is the right decision for the group and in the long-term interests of shareholders.”
Jenkins himself has waived his bonus of up to ₤2 million for a second consecutive year.

**As of 09.06 UTC buy Barclays shares at 262.22p.**
**As of 09.06 UTC sell Barclays shares at 261.18p.**
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