To most outsiders it will seem very odd to see Barclays award £2.15bn in bonuses while paying out just £730m in dividends to shareholders for 2011, so it is not surprising that there has been such a significant revolt by the bank's shareholders today, with 26.9% of votes cast by them rejecting the board's remuneration report.
Although the remuneration report was passed, it is worth noting that under the reforms being considered by the government – introducing a 75% approval threshold for shareholder votes on pay rather than a simple majority – it would not have been approved today.
Excessive pay and rewards for failure are bad for shareholders, the economy and society. While we are clear that it is right that those who work hard, generate wealth and create jobs for our country are rewarded, where failure is rewarded or people award themselves huge pay rises that bear no relation to performance or what their companies can bear, trust is severely undermined.
Barclays shareholders have today sent a clear message that the onus is on remuneration committees to justify these rewards, and that where excessive pay exists, it will be challenged. This is in line with the actions of shareholders of Citibank in the US, who this week rejected the board of that bank's remuneration report.
Investor groups too, such as the Association of British Insurers, have said that there must be a change in culture and reform to end excessive pay and rebuild trust – we in Labour agree. It is clear that we cannot go back to business as usual as far as pay and bonuses are concerned. Calls for reform are growing.
One way to promote shareholder engagement and activism is through greater accountability and transparency. That is why we have argued – in the face of opposition by George Osborne and Vince Cable – that institutional investors and fund managers should be required to disclose how they exercise voting rights on all issues. While fund managers such as CCLA disclosed in advance of today's vote that they intended to vote against Barclays' remuneration report, not all have done so nor are they required to do so under the law as it stands.
Requiring fund managers to disclose how they vote would increase accountability and mean that pensioners and ordinary investors would more easily be able to see how those acting on their behalf vote on all issues, including remuneration. Legislation to bring forward this change is already on the statute book, but the government has not enacted it. This week Labour tabled an amendment to the Financial Services Bill to do so, but ministers are refusing to make the change.
This proposal comes on the back of our support for all of the recommendations of the High Pay Commission, in particular putting an employee representative on remuneration committees. In addition I have also said that we should examine looking at reforming board nomination committees so they are composed of shareholders, creating stronger lines of accountability for those who ultimately own the business.
We all have an interest in seeing greater responsibility exercised in the City. It is after all the British people who continue to provide an implicit taxpayer subsidy to the sector from which Barclays and other banks benefit. If banks like Barclaysfail to sufficiently justify to their owners and the wider public paying out large bonuses, it will further erode rather than rebuild the trust and confidence in our banking system we want to see return.