Lloyds Banking Group to claw back bonuses?

Lloyds Banking Group to claw back bonuses?

The Financial Times has today reported that Lloyds Banking Group (LBG) is considering clawing back part of the bonuses awarded to several top executives in response to the hit it is taking on miss-sold loan insurance. Chairman Win Bischoff commented that the compensation committee is “having discussions with the regulator”.

 What is Clawback?

The Financial Services Authority (FSA) defines clawback as “A performance adjustment technique that allows firms to demand payback of all or part of an individual’s bonus that has already vested with the individual, to take account of developments after vesting”.

Financial Services Authority (Remuneration Code)

I suspect that the Chairman was referring to the FSA remuneration Code; as in December 2010, the FSA published an updated Remuneration Code to take into account changes required by the Capital Requirements Directive, (Directive 2010/76/EU) commonly known as CRD3. The revised Code (contained in SYSC 19A) came into force on 1 January 2011 and applies to an estimated 2,500 FSA-authorised firms.

Philip Henson, says:

 “I consider it likely that LBG will attempt to “clawback” bonuses already paid to executives, although lawyers will be interested to review the exact terms of directors service agreements, and incentive plans”.

Remuneration committee report for LBG

The Remuneration report of LBG lists the Directors emoluments (who served in 2010) as follows:

  Other benefits Performance-
Executive Directors
J E Daniels 1,035 78 9 1,450 2,572 1,121
A G Kane 590 24 27 767 1,408 1,523
G T Tate 640 27 28 1,050 1,745 1,807
T J W Tookey 600 36 1 942 1,579 1,736
H A Weir 625 57 21 875 1,578 1,767
Non-Executive Directors
Sir Winfried Bischoff 700 12 712 211
A M Frew (from 1 December 2010) 8 8
Sir Julian Horn-Smith 100 100 100
Lord Leitch 308 308 249
G R Moreno (from 1 March 2010) 134 134
D L Roberts (from 1 March 2010) 104 104
T T Ryan 113 113 83
M A Scicluna 130 130 121
Anthony Watson 115 115 71
Former director who served during 2010
W C G Berndt (until 6 May 2010) 35 35 100
Others 1,011
5,237   234 86 5,084 10,641 9,900

And the bonuses awarded to directors were as follows:

Name J E Daniels A G Kane G T Tate T J W Tookey H A Weir
Maximum Opportunity 225% 200% 200% 200% 200%
% awarded for 2010 140% 130% 164% 157% 140%
Bonus awarded for 2010 £1,450,000 £767,000 £1,050,000 £942,000 £875,000

Lloyds Banking Group

Lloyds Banking Group is the UK’s largest retail bank owning the following: Lloyds TSB, Halifax, Bank of Scotland, Scottish Widows, Clerical Medical and Cheltenham & Gloucester, and a range of distribution channels including the largest branch network in the UK.

Link to the Lloyds Banking Group Webcast and AGM poll results

Here is a link to the webcast, and poll results.

Response to Judicial Ruling on Payment Protection Insurance

Here is a link to the recent Judicial Ruling on payment protection insurance.



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