Investors in Barclays (LSE: BARC.L - news) have been warned that the bank faces a battle to fully withhold bonuses owed to Bob Diamond and Jerry del Missier, the two top executives who quit the bank last week.
I understand that lawyers acting for Barclays have informed directors that the contracts of the former chief executive and chief operating officer are likely to enable them to walk away with significant chunks of their bonuses despite the bank being fined £290m for attempting to rig the interbank borrowing rate Libor 10 days ago.
It is partly for that reason that - as I disclosed last week - Alison Carnwath, the non-executive director who chairs the Barclays remuneration committee, is understood to have asked Mr Diamond to voluntarily waive approximately £18m in deferred long-term and annual share awards triggered by his resignation.
"Bob built Barclays' investment bank into a world leader and that’s one factor being taken into account by the lawyers," a source close to the Barclays board told me. "A contract is a contract."
I'm told that the prospect of withholding and clawing back elements of Mr del Missier's past bonuses is more likely because of his involvement in the instruction to Barclays employees to lower the bank's Libor submissions during the strife-torn autumn of 2008.
Barclays does have a clawback provision in the contracts of a large number of senior executives - those who are judged to be 'code staff' by the City regulator - which makes it inevitable that the bank will be able to demonstrate that it has effectively cancelled tens of millions of pounds in bonuses even if it does not succeed in restricting Mr Diamond's payoff to the contractual minimum.
Sir Michael Rake, the deputy chairman and favourite to take the helm, briefed shareholders to expect a wide-ranging clawback effort at a meeting on Thursday.
The 2011 Barclays annual report, published earlier this year, states: "Events that may lead to clawback include employee misconduct, harm to Barclays reputation, material restatement of Barclays financial statements, a material failure of risk management or a significant deterioration in the financial health of Barclays. Awards may also be suspended where an employee is under investigation for a regulatory or disciplinary matter."
It's clear from the events of the last ten days that many of these 'events' have occurred, and I'm told that Marcus Agius, the chairman, wants to be able to provide more detail on the clawback plans when he appears before the Treasury Select Committee on Tuesday.
In other developments relating to the crisis at Barclays, I've learnt that:
- easyJet, the budget airline, is preparing to elevate Charles Gurassa, its deputy chairman, to the top job if Sir Michael makes way to take the Barclays chairmanship.
- Sir Michael has told investors that he will only agree to replace Marcus Agius as Barclays' chairman if he has the full support of investors, regulators and senior politicians, although I suspect that the endorsement of leading political figures will count for little if other mis-selling scandals emerge after Sir Michael is installed in the post.
- Barclays directors will early next week sift through a list of names of potential candidates to head an independent inquiry into the business practices and culture of the bank. Contenders will include Sir David Walker, the author of a report on bank governance reform; Sir Richard Lambert, former head of the CBI; Anthony Salz, the respected City lawyer; and Lord Davies, former trade minister.
- BT (LSE: BT-A.L - news) is likely to begin searching for a new chairman within weeks if Sir Michael looks likely to take the Barclays role although he would not step down from the telecoms group’s board until his replacement has joined.
- The brief for Mr Diamond’s successor as Barclays' chief executive will entail identifying a candidate who has a strong relationship with both US and UK financial regulators.
Barclays was unavailable for comment.