Mark Kleinman: Are Barclays pay rows a mere historical relic?
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly CityAM column. This week, he tackles pay rows at Barclays, how WH Smith is clinging on and a floating debate for Monzo
Are Barclays pay rows a mere historical relic?
There was a time when Barclays and public pay rows were as predictable an entry on the calendar as a May bank holiday.
Bob Diamond, the then chief executive, was dubbed by Peter Mandelson “the unacceptable face of capitalism”; both Antony Jenkins and Jes Staley, Diamond’s successors, bore the brunt of similar confrontations over the bank’s bonus pools. Only recently, with CS Venkatakrishnan at the helm, has pay become a less incendiary flashpoint for City investors.
Indeed, the external reaction was striking last week when I revealed on Sky News that Mr Venkatakrishnan’s base salary would be nearly halved from next year as part of an overhaul that will see his total package capped at £14.3m.
“If we aspire to compete globally then our companies need good CEOs, shareholders should be prepared to have structures that are suitably aligned with international peers,” Ambrose Faulks, a fund manager at top ten Barclays investor Artemis Investment Management, said.
Faulks is right, although the alignment with international peers is still relatively distant. Brian Gilvary, Barclays’ remuneration committee chair, weighed in in a letter to shareholders, saying that there was a “recognition [in the pay proposals] that Barclays competes with a broad range of peer banks, including the leading US universal and investment banks, though we must ensure maximum total compensation does not approach the level of US peers to reflect our UK-listed context”.
That encapsulates the challenge highlighted by the London Stock Exchange chief Dame Julia Hoggett when she called for an acceptance of higher pay packages to ensure London-listed companies were competitive.
In a note to clients this month, Stephen Cahill, a partner at remuneration consultants Farient Advisers, wrote that “a more challenging AGM season will emerge [in the UK] as proxy agencies and shareholders adapt to the new ‘normal’”.
“We believe remuneration committees will increasingly accept lower voting outcomes to do the right thing for the company.”
I suspect Cahill is right; I’d also expect that Barclays’ AGM this spring will show that the mood among shareholders has shifted to a more permissive approach – to higher-quantum but carefully constructed CEO pay plans.
WH Smith’s high street survival is a miracle
Lakeland, Poundland, The Original Factory Shop, WH Smith: the flurry of prominent British retailers exploring sales or restructurings is not a coincidence.
Rachel Reeves’s Budget simultaneously gave chains a convincing narrative to pursue long-planned job cuts, tipping others over the edge or hastening unexpected sale decisions.
In the last category falls WH Smith, the 233 year-old retailer of books, stationery and greetings cards. For consumers of my age, the suggestion of a sale evokes a nostalgia about weekend days spent happily prowling the aisles for novels, magazines and music.
The more remarkable point is that WH Smith has survived on the high street on the scale it has for so long – and that largely thanks to the tight cost control and ruthless ranging decisions of a series of chief executives.
For Carl Cowling, the current incumbent, disposing of the high street unit to focus on its higher-margin, faster-growing travel retail operations is an entirely logical strategic move – witness the response of WH Smith’s shares on Monday morning.
It is not, however, without significant reputational risk. Assuming the high street business is sold to a turnaround investor, it’s likely that the new owner takes a more ruthless approach to underperforming stores than the current owner has done.
Unless there are undertakings about job or store preservation built into an agreement, some of those currently engaged in talks will be more brutal than others. The list of prospective investor names already in the public domain – such as Alteri and Modella Capital – reflects the fact that while WH Smith’s high street business is not yet distressed, a hefty restructuring is inevitable.
Monzo banks on choosing the right listing venue
London or New York? That’s the question confronting many a flotation candidate, as well as a growing number of already-listed companies, during the debate about the attractiveness of the City’s public markets.
Among them is Monzo, the digital bank which orchestrated a secondary share sale in October valuing it at £4.5bn. As part of that deal, investors including GIC, the Singaporean sovereign wealth fund, and Mubadala, its Abu Dhabi counterpart, acquired meaningful stakes.
Unsurprisingly, the debate is increasingly turning to when and where it might list its shares, with TS Anil, the chief executive, reported to favour a US IPO and the company’s board leaning towards its home market.
A substantial US acquisition might shift the dial in favour of Anil’s view, but in reality, when boards and CEOs’ views differ, there tends to be only one outcome.
Notwithstanding the fact that its valuation is often overshadowed by that of Revolut, Monzo’s growth in recent years has been startling. It now has more than 11m customers – two million of whom have joined in the last financial year.
Nevertheless, there is change afoot. I understand that Fernando Fanton, its chief product officer, has decided to leave the bank, according to an internal memo circulated earlier this month. Other executive changes have been coming thick and fast, with the appointment of new finance chiefs at both group and UK level. One to watch.