Lloyds Banking Group is mulling a shake-up of pay that could see it ditch annual bonuses for senior staff and extend the term of incentives to up to ten years.
The bank is said to have raised the proposals with investors to ward off any action such as the recent “shareholder spring” that saw protest votes against the remuneration reports of some of Britain’s biggest companies.
The scrapping of annual bonuses and the ten-year timeframe for pay-outs, compared with the three years for typical long-term awards, were the most radical of a range of options.
Lloyds is also thought to be considering new trigger points for pay-outs, including one relating to the share price hitting 74p, equivalent to the price paid by the UK government for its 40 per cent stake when it bailed out the bank in the wake of the financial crisis.
Some of Britain’s biggest companies – including banks – were subject to rebellions over pay at their annual meetings this year.
Barclays was stung when nearly a third of shareholder votes failed to back its pay awards, largely driven by anger over a huge deal for former chief executive Bob Diamond. Diamond, who left the bank under pressure over the Libor-fixing scandal, has since waived his right to about £20 million in deferred share bonuses.
Insurer Aviva, British Gas parent Centrica and advertising giant WPP all faced similar protests over their own pay plans as the issue of remuneration came under increased scrutiny from shareholders and politicians alike.
Lloyds avoided such a rebellion at its own annual meeting earlier this year, where 97.6 per cent of shareholder votes backed its remuneration report.
But its executive pay is on a par with rivals, with chief executive Antonio Horta-Osorio’s package – salary, annual bonus, long-term incentive plan and pension – around £8.5m depending on performance.
HSBC last year changed its rules to force senior staff to hold on to share-based bonuses until retirement, a model used at Goldman Sachs for partner-level bankers.
Yesterday a spokeswoman for Lloyds said: “We keep our remuneration plans under review at all times but have no current plans to change our structures and do not expect to do so in the foreseeable future.”
Meanwhile, the bank will have to wait until at least next summer to hear the Financial Services Authority’s report into the failure of HBoS, which Lloyds tried to rescue with disastrous effect in 2008.
The regulator reportedly started its report “from scratch” after the decision in September to fine the bank’s former head of corporate lending Peter Cummings £500,000 for his part in the collapse, to avoid prejudicing the proceedings.