e - A d v e n t u r e

Eric Daniels bows to pressure and forgoes bonus for second year
Katherine Griffiths, Banking Editor


Eric Daniels, Lloyds’ chief executive, has become the latest banking boss to waive his bonus in an attempt to defuse the political row about remuneration.

Mr Daniels yesterday told the board that he would not take a £2.3 million payout, marking the second year in a row that he has turned down a bonus. Mr Daniels will receive his £1.035 million base salary.

The Lloyds boss has been under intense pressure to turn down a bonus after John Varley, the chief executive of Barclays, and Bob Diamond, its president, said last week that they were turning down their awards, despite Barclays nearly doubling profits to £11.6 billion in 2009.

Stephen Hester, the chief executive of Royal Bank of Scotland, followed suit by saying on Sunday that he would not take a bonus, which could have been worth about £1.6 million.
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RBS, which is 84 per cent taxpayer-owned, is set to report a loss of about £5 billion on Thursday, while analysts estimate Lloyds’ loss, to be reported on Friday, of anything between £4 billion and £11 billion.

Sir Win Bischoff, Lloyds’ chairman, yesterday said that Mr Daniels had decided not to take his bonus so the bank’s progress in 2009 would not be “obscured” about the row over pay.

The move was also in sympathy with Lloyds’ 30 million customers, Sir Win said. The bank, which is 41 per cent government owned, understands “the financial hardships that many households and businesses are experiencing”, he said.

In a statement that surprised some investors, Sir Win added that Mr Daniels was entitled to his full bonus, worth £2.3 million, or 225 per cent of base pay, “because of his significant individual contribution”.

One significant shareholder said that the message had been conveyed to Lloyds in recent weeks that Mr Daniels should consider not accepting a bonus, given that the institution is still deeply loss-making.

Others are more positive about the Lloyds boss, pointing out that he pulled off a record £23 billion fund raising, keeping the bank out of the Government’s insurance scheme for toxic assets and preventing the state’s stake from rising.

Lord Oakeshott, the Liberal Democrat Treasury spokesman, said that it was extraordinary that Mr Daniels “could even consider taking a bonus when he is running a loss-making, publicly-rescued bank”.

Mr Daniels will also have to justify the fact that Lloyds has not met its lending targets to small businesses, Lord Oakeshott said.

RBS and Lloyds were set a combined target of lending £39 billion by the end of February to both business and individual customers. Neither bank is expected to meet the commitment.

The banks say that business customers have been unwilling to borrow because they do not want to saddle themselves with debt, while customers have complained that loans are available only at punitive rates.

With Mr Daniels following his peers, pressure will mount on HSBC, which will decide its executives’ pay before its results next Monday.

Under the current plan, Michael Geoghegan, HSBC’s chief executive who moved to Hong Kong this month, could receive more than £4 million as a bonus and a long-term incentive plan worth £7 million.

Those sums — the maximum possible — are very unlikely to be paid out, insiders said. However, the situation is particularly tricky because HSBC is also trying to persuade shareholders to back a 40 per cent increase in the base pay of both Mr Geoghegan and Douglas Flint, its finance director.

Mr Geoghegan’s 2009 pay is £1.1 million, while Mr Flint is on £700,000. Neither has received a pay rise for three years and all of HSBC’s UK executive directors waived their bonuses in 2008.

• Gerald Corrigan, managing director of Goldman Sachs, said that currency swaps his bank had entered into for Greece in 2001 could have been more transparent. He told the Treasury Select Committee that there was “nothing inappropriate” about the deals, which produced “a rather small but nevertheless not insignificant reduction in Greece’s debt to GDP ratios at that time”. Giving evidence on whether some banks are too big to fail, Mr Corrigan said that Goldman had benefited from about $28 billion (£18 billion) of taxpayer funds including money for credit default swap contracts with AIG, the insurance group that was bailed out in September 2008. He said that Goldman was “disproportionately singled out” by the public because it was so successful, but he added: “I don’t think it’s unfair . . . It’s perfectly understandable that people are angry.”


what are your view on not taking bonuses because it makes the company look good?