COMMONS

Lloyds pension move “smacks of feverish desperation and boundless greed”

15 May 2019

The Committees are today publishing an “explanation” of executive pension levels at Lloyds Bank, ahead of the Group’s Annual General Meeting tomorrow, on Thursday, and amid reports that the bank has released a video to employees in an apparent attempt to garner shareholder support for the pay packages that will be put to the vote at the AGM. A fifth of shareholders voted against Lloyds’ pay report last year.

On 2 May the Committees wrote to Lloyds remuneration committee asking why Lloyds chief executive “Mr Horta-Osório’s pension contribution rate stands at 33%, when the maximum employer contribution rate stands at 13% for other Lloyds employees – and the contribution rate for Lloyds’ Chief Operating and Financial Officers stands at 25% of salary.”

The Committees also questioned whether Mr Horta-Osório’s fixed share award increase, to £1.05 million, is “in the spirit of the Investment Association’s guidelines”. The chief executive’s total pay package is worth £6.27million a year.

Chairs' comments

Rt Hon Frank Field said: 

“Trying to twist the arms of thousands of hard-working staff  - who helped generate £6bn profit last year alone -  to wave through executive pension levels twice their own smacks of feverish desperation and boundless greed. The bank’s remuneration committee churning out a litany of excuses only further erodes what little dignity is left in these proceedings. Senior executives at Lloyds could bring this sorry episode to an end, today: just give it up.”  

Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee, said:

“The pension for the Lloyds Chief Executive is only the latest example of a damaging narrative for UK business – there being one rule for the bosses, another for the workers. Rather than setting challenging long-term targets for CEOs, pay committees are prone to gaming the system, designing ever more complicated pay packages to handsomely reward their executives. Setting CEO pay becomes an expensive version of whack-a-mole where pay committees, for appearance-sake at least, hammer down on one element, such as base salary, only to allow other parts, such as pension entitlement, to pop up to reward their executives.

“The Investment Association are clear that pension contribution rates for senior staff should be aligned with those of their workforce. But too often investors are supine in the face of extravagant executive rewards. In this AGM season, investors at Lloyds and other companies should take the opportunity to hold pay committees to account and vote against remuneration reports which include CEO pay packages vastly outstripping those of the wider workforce.

Work and Pensions Chair Frank Field commented earlier this week that:

“I can’t imagine any business standing proud before its investors under anything but the full green light from the Investment Association. And any shareholder looking to the board for leadership on the company’s values should use their vote next week to say so.” The Investment Association’s reply, also attached, opens with a statement of what investors should be able to expect:

“The UK Corporate Governance Code of states that pension contribution rates  should be aligned to those of the workforce … Investors expect new executive directors to be appointed on this level of pension contribution. The contribution rate for incumbent executive directors should be reduced over time to the contribution rate available to the majority of the workforce …” It goes on to describe “one likely impediment to companies achieving swift” compliance with IA guidelines is a contractual obligation regarding pensions: but goes on immediately to describe how this “impediment”  is simply and easily circumvented by a director voluntarily giving up contributions, “as demonstrated by HSBC.”

In March, the Business, Energy and Industrial Strategy (BEIS) Committee published a report saying that companies must do more to link top bosses’ pay to that of the rest of their workforce. The report said that “huge differentials” in bosses’ pay are “baked into the pay system” and that a heavy reliance on “over-generous”, incentive-based executive pay, too often waved through by weak remuneration committees in the habit of designing ever more complicated pay packages, is at the root of excessive executive pay packages.

Further information

Image: PA

More news on: Parliament, government and politics, Parliament, House of Commons news, Commons news, Committee news

Share this page