UK Markets closed

Schroders is right to warn on executive pay, now it can lead by example

Nils Pratley
Photograph: Eddie Keogh/Reuters

Many chief executives have already worked out that their pay packets, and those of their senior executives, will have to take a hit. In this climate, bosses cannot lay off staff, or place them in furlough, and expect life to carry on as normal for themselves.

There’s no harm, though, in big City fund managers aligning themselves with the message. So Schroders deserves a half a cheer for its “Dear UK plc” letter, sent out on Thursday, that stated: “Where companies seek additional capital we would expect their boards to suspend dividends and to reconsider management’s remuneration.”

The letter could have gone much further, however. Why stop at companies that are raising fresh capital to get through the crisis? When normality eventually returns, the pressure on UK plc to close pay ratios within their organisations will be immense.

Can the £5m-a-year chief executive – a common sight among FTSE 100 companies – expect his or her pay package to receive the same unquestioning nod of approval? Our understanding of “key workers” has changed.

And, since such sums are usually fuelled by share-based incentive schemes, we’re relying on the likes of Schroders to ensure remuneration committees do not deviously re-draw performance targets in executives’ favour.

Luckily, Schroders is well placed to lead by example. Its own chief executive, Peter Harrison, received a bonus of £5.68m last year and £6.17m the year before. While Schroders itself will probably breeze through the crisis because fund managers usually do, he’s surely not expecting to collect the same rewards in future. Or is he?

Why HSBC would be absurd to flee to Hong Kong

When HSBC, after months of navel-gazing, chose in 2016 to remain a UK-domiciled institution, the decision was a “generational” one, declared then-chairman Douglas Flint. In other words, the board thought there were better things to do over the next couple of decades than debate the appeal of Hong Kong.

But here we go again. The Bank of England’s move on Tuesday to bounce all big UK-based lenders into cancelling dividends this year caused consternation among senior figures at HSBC, reports the FT. Some want to re-open the domicile question.

One can understand a few snorts of indignation over the dividend block. HSBC makes most of its money in Asia, and Hong Kong locals are big holders of the shares. But move the bank’s legal home out of pique? The idea is absurd.

Have the grumbling HSBC executives forgotten already what was happening on the streets of Hong Kong before the coronavirus crisis struck? The place was full of pro-democracy supporters protesting against creeping political interference from Beijing.

The moral for a board with an eye to the long term should have been clear. An occasional dividend tickle from the Bank of England is vastly preferable to permanent over-arching oversight by a Hong Kong regulator that could end up under the control of the Chinese Communist party.

Mark Tucker, the current HSBC chairman, should stamp on the nonsensical talk. He should say outloud that a Hong Kong domicile is not happening on his watch.

What’s behind gambling watchdog’s latest streak?

The Gambling Commission has issued two record penalties in a matter of weeks, which might give the impression that betting firms have been behaving unusually badly of late, writes Rob Davies.

If anything, the industry – mindful of the government’s upcoming review of the 2005 Gambling Act – has been at pains to show that it is turning over a new leaf.

Gambling’s new trade body, the Betting & Gaming Council, has been at the forefront of this concerted charm offensive, although its claims that the industry is leading the way, rather than cleaning up its act at gunpoint, should be taken with a pinch of salt.

In any case, the transgressions that triggered £25m worth of sanctions from the Gambling Commission – against online casino Betway and casino owner Caesars Entertainment – weren’t of a degree more heinous than we’ve seen in the past few years.

The baring of the watchdog’s teeth tells us more about the precarious position in which it finds itself. MPs have deemed it unfit for purpose while even the National Audit Office says it is too underpowered to be effective in its duty to protect the vulnerable.

With addicts and the vulnerable at particular risk from online casinos during the Covid-19 lockdown, the Gambling Commission can ill afford to show weakness.