RUTH SUNDERLAND: Bonus clawback from executives? No chance
- Few bosses appear to be overburdened by moral qualms
- Toxic culture where executives being treated as though they are a class apart
- Calls for pay restraint but leaders of bluechip firms don’t think it applies to them
Remember Jeff Fairburn? The former boss of housebuilder Persimmon was supposedly such a business genius that in 2018 he was given a £75m package.
He comes to mind again this week as Persimmon has lost almost 60 per cent of its value since then and is expected to be kicked out of the FTSE 100 index.
So much for the house that Fairburn built. But he is just an extreme case of the absurdity of paying huge, socially divisive sums to executives. Dame Alison Rose, the NatWest boss who was forced to quit in the de-banking row with Nigel Farage, is not quite in the obscene Fairburn pay league.
It still sticks in the throat, though, to see an executive who has broken the most basic rule of banking – customer confidentiality – waltz off with millions in her designer handbag.
Her former employer has raised the prospect that she will face some sort of claw back. Don’t hold your breath.
Boardroom wrangling: Few bosses appear to be overburdened by moral qualms
In theory, misbehaving bankers can have bonuses taken back from them under measures introduced after the financial crisis.
There are also provisions known as malus, which is the opposite of a bonus. This refers to the withholding of an award that hasn’t yet been handed over.
In practice, it hardly ever happens. Companies are extremely reluctant to take this route, perhaps for fear that former executives may mount a challenge in the courts.
That is exactly what former Lloyds Bank chief Eric Daniels did, with a claim that his bonus had been withheld unlawfully. The upshot was that the bank was forced to give him shares worth up to £1.35m.
Barclays last year froze around £22m of bonuses for its former boss Jes Staley, who is embroiled in an investigation into his links to the late paedophile Jeffrey Epstein. Another of Staley’s former employers, JP Morgan, is attempting to claw back $80m from him. There is unlikely to be a simple resolution.
Of course, it is always possible an undeserving boss will choose to do the decent thing and give up the money of their own accord. Possible, though not probable. Few appear to be overburdened by moral qualms.
Post Office chief Nick Read is a rare example: he agreed to give back a bonus linked to an inquiry into subpostmasters who had been wrongly branded as thieves.
Bizarrely, the sum was doled out before the inquiry had even finished.
But so far as anyone knows, Paula Vennells, who presided over a policy of hounding innocent postmasters, has not repaid a penny of the £5m she made in her seven years at the top. It is incredibly difficult to reclaim ill-gotten gains from executives. Far better not to dish them out in the first place.
There is a toxic corporate culture where executives are being treated as though they are a class apart, bestowed vast amounts of pay and golden goodbyes regardless of failure or disgrace.
The Prime Minister and the Governor of the Bank of England are urging pay restraint to combat inflation, but the leaders of blue-chip companies clearly do not think it applies to them.
An audit of executive pay at FTSE 100 firms by our sister paper The Mail on Sunday this summer found chief executives whose businesses have fuelled the inflation and interest rate crisis – such as banks, energy firms and supermarkets – raked in more than £100m last year in pay and perks.
In one particularly egregious case, the MoS discovered that the CEO of bottling giant Coca-Cola HBC pocketed more than £500,000 in the past two years, as part of his £8m total, to help him cope with the cost of living. Beyond parody.