Fidelity Criticises Pay 'Mess' At Barclays

By Mark Kleinman, City Editor

The fund management giant Fidelity International has become the first big City institution to publicly criticise Barclays over its £2.4bn bonus pot, intensifying the pressure on the bank ahead of a potentially-fiery annual meeting next month.

Speaking exclusively to Sky News, Dominic Rossi, Fidelity's global chief investment officer, said he was "disappointed" Barclays had landed itself in a "public relations mess" by hiking bonus awards for 2013 by 10% despite a significant fall in profits.

He joined critics including the Institute of Directors in expressing dismay Barclays had decided to hand out almost three times as much in bonuses to staff as it was handing out in dividends to shareholders.

One of the most influential shareholder voices in the City, Mr Rossi oversees billions of pounds in investments made by Fidelity, which is among the biggest owners of UK-listed shares.

"We are disappointed that the distributions between employees and shareholders did not favour shareholders more. It is disappointing that a year after making various commitments on pay, they have got themselves into a PR mess again," he said.

Mr Rossi's remarks about Barclays underline the difficulty facing Sir David Walker, Barclays' chairman, who will step down next year, and Antony Jenkins, the chief executive, as they attempt to keep both investors and top-performing employees happy.

His remarks are likely to be particularly painful for Barclays since one of the bank's non-executive directors, Simon Fraser, spent 27 years at Fidelity, including a stint in the role that Mr Rossi now occupies.

Mr Fraser is to step down from the Barclays board this year.

Sir David Walker, chairman of Barclays

Mr Rossi has been among one of the most vocal advocates of remuneration reform in British boardrooms, recently threatening to vote against companies' pay policies unless they force top executives to hold onto share awards for at least five years from 2015.

Barclays is among the companies which have pledged to ensure executives such as Mr Jenkins hold onto share options for at least five years, which Mr Rossi said on Monday he welcomed.

Other commentators, including the Parliamentary Commission on Banking Standards, have called for banks to lengthen to as long as ten years the period until managers receive bonuses, which Mark Carney, the Bank of England Governor, said last week would be considered as part of a consultation on the issue.

It is unclear how Fidelity will vote on the Barclays remuneration report for 2013 at next month's annual general meeting.

It seems unlikely, however, that it will use its vote on future pay policy - the binding nature of which is new this year following reforms led by Vince Cable, the Business Secretary - to embarrass Barclays given the bank has moved to lengthen the deferral period for executive share awards.

Last autumn, Mr Rossi wrote to hundreds of UK companies to warn them of a tougher stance on that issue.

"Despite a broadly positive response to our initiative, change on the ground has been slow and we continue to be concerned that incentive schemes are too short-term in their orientation."

He added that longer deferral periods would "change corporate governance for the better, reduce the temptation of management to maximise short-term financial performance and instead promote investment and growth".

"It's quite clear that a number of leading companies are going to move," Mr Rossi said in his letter.

"It's also clear that a number aren't, and therefore we will find ourselves voting against a material number of reports next year."

Last week, Mr Jenkins ran into another row over pay, saying in a newspaper interview he had had to pay bigger bonuses to avoid its investment bank falling into "a death spiral".

In total, 481 Barclays workers' remuneration broke through the £1m threshold, a 10% increase on the previous year despite the sharp decline in profits.

The row over bonuses could be especially damaging given shareholders injected almost £6bn last year to help shore up Barclays' finances through a rights issue.

A round of shuttle diplomacy involving Mr Jenkins and Tushar Morzaria, Barclays' new finance director, has attempted to reassure investors they will exert a tighter grip on the bank's cost-base during the next 12 months.

Since replacing Bob Diamond, his lavishly-paid predecessor, Mr Jenkins has pledged to make Barclays a stakeholder-friendly bank by boosting shareholder dividends and punishing employees whose behaviour does not meet exacting standards.

However, Barclays has continued to face legacy issues including a Serious Fraud Office probe into a rescue fundraising in 2008, and, like other banks, sizeable compensation bills for insurance and other product mis-selling.

Barclays is not the only bank to have made troubling pay-related disclosures in recent days, however.

More than 100 employees at state-backed Lloyds Banking Group and Royal Bank of Scotland were paid more than £1m last year.

At the weekend, it emerged Euan Sutherland, chief executive of the Co-operative Group, would be paid more than £3.5m this year, including a £1.5m guaranteed retention bonus.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.

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