In a move that’s sure to raise eyebrows, Barclays is considering a radical overhaul of its chief executive’s pay package – one that could see CS Venkatakrishnan’s maximum compensation soar by a staggering 45% to over £14 million. The proposed restructuring, currently under review by the bank’s board, involves a trade-off: slashing fixed pay nearly in half, but allowing for bonuses up to eight times the new base salary. It’s a high-stakes gambit that’s already stirring debate about incentive structures and risk-taking in the banking world.
A Controversial Proposal
According to insiders, Barclays has reached out to its largest shareholders to float the potential pay revamp for both CEO Venkatakrishnan and finance chief Anna Cross. Under the terms being considered, the chief executive’s fixed pay would plummet from £2.95M to £1.59M – but he’d be eligible for annual and long-term bonuses worth up to 800% of that reduced salary.
That arithmetic could catapult Venkatakrishnan’s total compensation to a jaw-dropping £14.3 million in a best-case scenario, blowing past his previous £9.8M ceiling. The catch? Hitting that lofty new cap would require an astronomical leap in profitability, surpassing even Barclays’ own ambitious targets.
The Bonus Cap Backstory
This plan comes against the backdrop of a now-scrapped EU rule known as the bonus cap, which sought to rein in excessive risk-taking by limiting bonuses to twice a banker’s salary. Chafing against those constraints, UK banks resorted to inflating base salaries to keep their rainmakers happy. But that workaround drew the ire of at least one major Barclays investor last year, prompting calls to prune those fattened fixed-pay packages.
The EU bonus cap was designed to curb the kind of reckless behavior blamed for the 2008 financial meltdown.
Enter the post-Brexit landscape. UK regulators, eager to burnish the City’s appeal, jettisoned the bonus cap in late 2023. Barclays quickly capitalized, becoming the first British bank to scrap the limit for its top brass after securing shareholder approval last May. That paved the way for senior executives to rake in bonuses up to 1,000% of salary.
Implications and Next Steps
The Barclays proposal crystallizes a fundamental tension: how to structure executive pay to reward performance without encouraging undue risk. Advocates argue variable pay aligns incentives and protects against unmerited windfalls. Critics worry uncapped bonuses could resurrect the very excesses that stoked the financial crisis.
As for what comes next, the ball is in the remuneration committee’s court. They’ll pore over feedback before presenting any formal plan in Barclays’ annual report next February. From there, it goes to the shareholders – setting the stage for a closely watched vote on the future of banking pay.
Our remuneration policy will continue to focus on rewarding sustainable performance and aligning shareholder interests.
— Barclays spokesperson
One thing’s clear: in the post-Brexit, post-bonus cap era, the gloves are off when it comes to executive compensation in UK banking. Barclays’ gambit is sure to be scrutinized as a potential harbinger. Will it usher in a new paradigm or a return to the bad old days? As the debate rages, all eyes will be on how shareholders – and the court of public opinion – weigh in on this provocative proposal.
Key Takeaways
- Barclays mulls 45% pay hike for CEO via slashed salary, higher bonus
- Plan tests post-Brexit waters on banking pay, sparks debate on incentives
- Remuneration policy aims to “reward sustainable performance”
- Shareholder, public reaction will be closely watched
As this high-stakes compensation drama unfolds, it promises to shed light on the delicate balance between risk and reward in modern banking – and on society’s evolving views on executive pay in a rapidly shifting regulatory landscape. The Barclays proposal may be a single data point, but its ripple effects could shape the trajectory of the industry for years to come.
