Yahoo Finance Pressure piled on Standard Chartered over £7m bonuses
Standard Chartered faces a humiliating investor revolt over a £7.1m share bonus scheme it is handing to its boss and finance chief as a reward for reviving the fortunes of the troubled emerging markets focused lender.
Institutional Shareholder Services (ISS), the influential investor advisory firm, has told shareholders that it is concerned that the targets set for the top bosses in the bank’s long-term incentive plan (LTIP) are not demanding enough. Bill Winters, the chief executive, stands to net share awards with a face value of as much as £4.4m from the scheme, while Andy Halford, the chief financial officer, could receive £2.7m.
Although ISS has stopped short of recommending that investors reject Standard Chartered’s remuneration report because of the LTIPs, the criticism will nevertheless pile pressure on the bank ahead of its annual general meeting on Wednesday. It comes after some of the bank’s investors expressed concern about the bonus scheme last month.
The main controversy is the return on equity (RoE) target for 2019 that accounts for a third of the LTIP plan, which ISS has described as being “markedly low”. The bank has cut the target in the scheme to a range of 5pc to 8pc, down from an earlier range of 7pc to 10pc.
The awards are scheduled to vest in five annual tranches from 2020 onwards.
“For many shareholders, RoE is the number one ratio when assessing investment performance and single-digit performance does not represent a functioning investment,” ISS said. “RoE of 8pc would trigger maximum payout under this element while representing a poor return for shareholders – this is a significant concern.”
Standard Chartered’s underlying RoE last year was just 0.3pc and in 2015 it slumped to a $1.5bn loss, its first time in the red since 1989. The bank was also hit by bad debts in Asia. Mr Winters took charge almost two years ago and swiftly axed the bank’s dividend, tapped shareholders for $5.1bn and outlined plans to slash 15,000 jobs by 2018 to drive a recovery.
It swung back to a $409m pre-tax profit last year but management also signalled the turnaround would take longer than expected, hence the justification for reducing the RoE targets.
Last week, the bank reported a near doubling of first quarter profits to $990m, driven mainly by “unusually low” loan impairment charges. Despite the recovery, Mr Halford cautioned that “we’re certainly not getting carried away”.
When asked about potential shareholder resistance to the revised LTIP targets, the finance chief said that investors had been “very understanding of the fact that there needs to be a blending of what is realistic with what is motivating and incentivising”.
A spokesman for Standard Life said: “The remuneration committee is clear that the intent remains to deliver sustainably higher returns as soon as possible.”
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