Lloyds Banking Group (LSE: LLOY.L - news) is planning an overhaul of the chief executive’s bonus scheme that will only see him receive an award once the taxpayer’s investment in the bank returns to the black.
The new pay deal would mean Antonio Horta-Osorio could not draw his 2012 bonus until Lloyds’ shares hit a level where the state was back in profit on its bail-out investment. The Government paid £20bn for a 41pc stake in the bank in 2008.
Sources at the bank confirmed the remuneration committee was considering the proposal for Mr Horta-Osorio, who has been chief executive since early 2011.
He is eligible for an award of more than £2m but no decision has yet been made on how much he will be granted. To claim the bonus, he would have to wait until the shares rose above a set price and remained there for a sustained period. Like all Lloyds bonuses, it would then be deferred for three years and subject to clawback.
The taxpayer bought Lloyds shares at 73.6p but Lloyds has made payments that bring the equivalent entry price down to 64p. The remuneration committee, which meets at the end of the month, is also weighing up which share price to use as the bonus trigger. If adopted, a similar deal could be used for a new pay package for 2013 and beyond.
Details emerged as Mr Horta Osorio and Lloyds chairman Sir Win Bischoff appeared before the Parliamentary Commission on Banking Standards. Sir Win said bonuses for 2012 “will be the lowest undoubtedly of any bank”. He said: “We are very conscious of the point... that as a taxpayer-owned company we should, perhaps more than others, be very much aware of the public sentiment in relation to that and we will be.”
The bank revealed it has hired more than 5,000 specialist compliance staff to handle customer complaints over the payment protection insurance (PPI) mis-selling scandal.
Mr Horta Osorio also set himself against his banking colleagues by backing the Chancellor’s plan to give regulators the powers to break up banks that are not complying with ring-fencing rules. He said he had not been notified about the British Banking Association’s comments in protest at the move, adding: “I do support electrification.”