UK banks are set to secure significant pay increases for their bosses, with some executives potentially earning up to £15m per year, as influential proxy advisory services back the move to attract top talent and US businesses.
UK Banks Expected to Win Shareholder Approval for Big Pay Rises for Bosses
The London Stock Exchange and City lobby groups have claimed that higher pay is key to luring top talent and US businesses to Britain.
The Rise of Executive Pay in the UK Banking Sector
In the coming weeks, UK banks are expected to win shareholder approval for massive pay increases for their bosses. This decision has been backed by influential proxy advisory services ISS and Glass Lewis, who argue that hiking maximum payouts for chief executives will give them a competitive edge.
Executive compensation, also known as executive pay, refers to the payment and benefits received by a company's top executives.
In the United States, executive pay is largely governed by federal securities laws, which require publicly traded companies to disclose certain information about their CEO and other high-paid employees.
According to a 2020 report, the median compensation for CEOs in S&P 500 companies was $21.3 million.
Critics argue that excessive 'excessive executive pay' can lead to income inequality, while proponents claim it is necessary to attract top talent.
Key Figures and Proposed Payouts
NatWest Group is proposing a 43% increase in the maximum for its chief executive, Paul Thwaite, giving him the chance to earn up to £7.7m for a single year’s work. His Barclays counterpart, CS Venkatakrishnan, could earn up to £14.3m if shareholders approve a new pay policy next month. HSBC is suggesting a 43% increase for Georges Elhedery, for a maximum payout of about £15m.
The Argument Behind the Pay Increases
Glass Lewis and ISS said shareholders should be ‘mindful’ of the significant increases, but sided with remuneration committees who argued payouts needed to compete with that offered at rival banks including on Wall Street. That includes JP Morgan, where the chief executive, Jamie Dimon, was paid $39m (£29m) last year.
The Impact on Talent Attraction and Global Presence
The London Stock Exchange and City lobby groups claimed higher pay is key to luring top talent and US businesses to Britain. However, NatWest, which does not have an international presence, has also secured the backing of proxy advisers.
A Shift in Shareholder Sentiment
The decision by ISS and Glass Lewis to back the pay increases mark a significant shift in shareholder sentiment, and has also been coupled with a backlash against environmental, social and governance (ESG) standards.
The ESG Backlash
The focus on ESG prompted a raft of shareholder rebellions over pay in the early 2010s, including at HSBC and Barclays, as investors demanded a more measured approach by company executives after the ‘2008 financial crisis.’
