Earlier this month the chief executive of Barclays Bob Diamond recieved a complex pay deal amounting to £17 Million. This was one of the highest “packages” of pay, bonuses and other perks, that was recieved in Britain.
What was the response of the Financial Services Authority? I can find no reference to this package on their web site. There were, however, two guidelines that are intended to guide their analysis of bonus payments.
The first concern is if any risks are generated by the way the remuneration committee is composed. Such a risk might be if there were any conflict of interest among the members of this sub-committee of the main board. In this case there is a convention that the sub-committee is composed of non executive directors, often from outside the bank. However, one member, indeed the chair of the sub-committee is Marcus Agius. Marcus Agius is not only an executive director, he is also the chairman of the bank. Yet the sub-committee decided that there was no conflict of interest.
The second guideline says that the FSA is not concerned with the amount of bonuses, which they see as a matter for the sub-committee only. This explains why there was no comment on the size of the package.
The problem is not just that the sub-committee is awarding itself large packages; but that this sets a standard for other large firms across the country. Is this a failure by the FSA?
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