Barclays chairman Marcus Agius was heckled at the bank's annual general meeting (AGM) as he talked about the controversial issue of executive pay.
With a command of understatement for which a certain breed of British gentleman is renowned, Agius remarked that "remuneration continues to be an issue of considerable debate - not just in the banking sector but across businesses more generally," in a speech he made before handing over the microphone to the bank's Chief Executive Officer, Bob Diamond, who received a £1.35m salary, a £2.7m bonus and also £2.25m in long-term incentive payments from Barclays in 2011.
Agius said the board recognises and accepts that remuneration levels across the banking industry have to adjust to what he called "the new reality of higher capital and lower returns for the sector".
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The Barclays Chairman conceded that the bank had not done a good enough job in explaining why it had paid out so much in bonuses in a year in which profits fell, but stressed that the structure of awards to its senior employees had become more complex in recent years "as a result of popular and regulatory pressure to deliver greater alignment between the interests of shareholders and employees."
In an attempt to quell shareholder anger at their pay packages Barclays chief executive Bob Diamond and finance director Chris Lucas have voluntarily agreed to have the release and payment of their 2011 bonuses subject to a further performance condition.
"This means that half of their award would be forfeited if Barclays' Return on Equity is below its cost of equity," Agius explained.
"I think this gesture acknowledges the concern expressed by shareholders and demonstrates Bob and Chris's confidence in the future prospects of your company," Agius maintained.
The gesture went down well with insurance firm Standard Life, which released a statement saying Barclays had "responded positively" to its concerns over last year's executive bonuses, and indicated it would now vote in favour of the remuneration report at the AGM.
The man of the moment, Bob Diamond, said his major priority at Barclays is to meet new regulatory demands while delivering sustainable returns above the cost of equity.
"Right now, we're operating in an environment where the industry faces demands that are often inconsistent and sometimes conflicting. Regulators want banks to take less risk and hold more capital, challenging our ability to deliver returns; political leaders want us to take more risk and lend more in order to support economic recovery; share holders want banks with higher returns that pay out more in dividends. These are some of the dilemmas we are managing," Diamond said.
The woman of the moment, Alison Carnwath, who chairs the Board Remuneration Committee, was, if anything, under more pressure than "Diamond Bob".
She said the decisions that the Remuneration Committee needed to make this year were even more challenging than usual, and noted that: group total incentive awards for 2011 were down 26% on 2010; investment banking total incentive awards were down 35%; bonuses for executive directors and the group's eight highest paid senior executive officers were down 48%.
"We will continue to seek to push down remuneration levels in the context of the competitive environment," Carnwath pledged, adding that she and the rest of the Remuneration Committee were "under no illusions that the balance of rewards between shareholders and employees has to change in favour of shareholders."
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