The chief executive of Lloyds Bank (LLOY.L) has had his pay cut after criticism of his £6.5m ($8.4m) remuneration package.
Lloyds’s annual report, published on Thursday, showed Antonio Horta-Osorio earned £4.7m in 2019, which was 28% lower than his take home pay in 2018.
The drop in pay came as Lloyds reported a 26% slump in annual profits due to PPI mis-selling charges. Stuart Sinclair, chair of Lloyds’s remuneration committee, wrote in the bank’s annual report that the reduction in pay package reflected the fact that “performance and conduct do have material consequences.”
The total that Horta-Osorio could potentially earn in 2020 has also been reduced by 29%, although he could still take home a maximum of £8.3m if everything goes his way.
Horta-Osorio earned £6.5m in 2018 when bonuses and incentive schemes are included. It made him Britain’s best paid bankers that year.
The bumper pay package attracted scrutiny last year. The chief executive was forced to defend his pay to MPs on the Work and Pensions Committee, who said frontline staff at the bank had complained about the disparity between staff and chief executive pay.
“We have listened to feedback and the external sentiment around executive remuneration,” Sinclair wrote in the bank’s annual report on Thursday.
“We are very focused on addressing the pay gap from the bottom up and not just from the top down, in other words, by taking action to increase pay and pensions for more junior colleagues.”
The pay gap between Horta-Osorio and the average Lloyds employee reduced from 169:1 in 2018 to 128:1 last year.
The committee has also overhauled its executive pay structure to make it simpler and to reign in controversial pension arrangements.
Horta-Osorio received 33% of his base salary as a cash payment in lieu of pension in 2018. That was out of line with the vast majority of Lloyds staff, who are entitled to only 13% of salary as pension.
Investment Association (IA) guidelines state that pension contributions for staff and executives should be aligned and total pension contributions for CEOs should be capped at 25%. The IA criticised Lloyds for failing to heed its guidelines.
Lloyds said on Thursday it was reforming its pay system to align it with the IA’s recommendations. Horta-Osorio’s pension contributions reduced from 45% of salary to 33% in 2019 and will drop to 15% in 2020.
Horta-Osorio told journalists on Thursday he was “absolutely fine” with the pay cut. He said his pay was a decision for the board and the remuneration committee who are “totally independent”.
“Considering all the situation in the bank, they decide what should be done,” he said.