Failure often gets rewarded in the zany world of British plcs and Barclays is no exception.
First, the London-based bank chose to pay its president Bob Diamond £36 million last year, making the American investment banker the highest-paid executive of any FTSE 100 company. And that was in a year during which Barclays had to make writedowns of £1.6 billion as a result of ill-judged investments in subprime-related instruments, a figure that is almost certain to rise. It must also be remembered that Barclays also recently paid a fortune to investment bankers and lawyers for failing to acquire the Dutch bank ABN Amro.
If this wasn’t toe-curling enough, the former Quaker instutition has also opted to pay its former finance director, Naguib Kheraj, £20,000 per day (£600,000 per month) merely for agreeing to stay on during the bank’s abortive bid for ABN Amro. So Kheraj, pictured above, was earning around what the average Brit earns per year — each and every day — during the nine months in which the bank’s bid for ABN Amro unravelled. Astonishingly, there were no performance targets attached. So he still pocketed more than £5 million, even though the bid proved abortive.
To me this seems like a breach of good corporate governance — all the more so given that, while Kheraj was Barclays’ full-time finance director, he earned a salary “just” £700,000. What did Barclays’ “remuneration committee”*, the directors who are supposed to police executive pay at the bank, think they were playing at? Did they really believe that it was right to start paying someone nearly as much per month as they used to earn in a year, with no performance targets attached?
To the legions of hard-working, middle-ranking executives at Barclays, as well as the call centre staff, the tellers and the ledgers, this whole thing must stink.
Here’s what Nils Pratley had to say about it in today’s Guardian:
It’s hard to know who enjoys the greater bragging rights at Barclays. Is it Bob Diamond, who took home £36m in cash and shares as his three-year bonus scheme came up trumps? Or is it Naguib Kheraj, the former finance director, who was paid £600,000 a month to stay on for eight months to advise on the bid for ABN Amro?
On balance, Kheraj gets the nod. His package contained no performance conditions whatsoever — the bid failed. He was simply in the right place at the right time. Barclays wanted a familiar face during the scrap and he knew the books backwards.
Yes, he was performing a different role during the bid but, come on, he hadn’t turned into Superman overnigh… The suspicion is that Barclays did a favour to a popular old colleague in the knowledge that shareholders would discover the size of its largesse only after the event. It’s mucky.
To view Nils Pratley’s original Guardian column click here
* It increasingly seems to me that the raison d’etre of most “remuneration committees” is to ensure that plc directors get paid as much as they can get away with – without incurring the wrath of the corporate governance watchdogs or a shareholder revolt. This is an area I intend to examine in future articles.
This blog post was published on 27 March 2008