RUTH SUNDERLAND: Executive bonus recovery? No possibility
- Few bosses seem to be weighed down by moral scruples
- Toxic culture where executives are treated as if they were a class apart
- Calls for wage restraint, but leaders at blue-chip companies don’t think it applies to them
Do you remember Jeff Fairburn? The former boss of the Persimmon homebuilder was allegedly such a business genius that in 2018 he received a £75m package.
It 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 far the house that Fairburn built. But he is just an extreme case of the absurdity of paying huge and socially divisive sums to executives. Dame Alison Rose, the NatWest boss who was forced to resign in the ouster dispute with Nigel Farage, isn’t quite in Fairburn’s obscene salary league.
However, it still sticks in our throats to see an executive who has broken the most basic rule of banking – client confidentiality – walk away with millions in her designer bag.
His former employer has raised the possibility that he faces some form of recovery. Don’t hold your breath.
Boardroom disputes: Few bosses seem to be weighed down by moral qualms
In theory, bankers who misbehave can have their bonuses withdrawn under measures introduced after the financial crisis.
There are also provisions known as malus, which is the opposite of a bonus. It refers to the withholding of a prize that has not yet been delivered.
In practice this almost never happens. Companies are extremely reluctant to go this route, perhaps fearing that former executives could challenge them in court.
That is exactly what former Lloyds Bank director Eric Daniels did when he claimed his bonus had been illegally withheld. The result was that the bank was forced to give him up to £1.35m worth of shares.
Last year, Barclays froze around £22m in bonuses for its former boss Jes Staley, who is embroiled in an investigation into his links to the late pedophile Jeffrey Epstein. Another of Staley’s former employers, JP Morgan, is seeking to recover $80 million from him. It is unlikely that there is a simple solution.
Of course, it’s always possible that an undeserving boss will decide to do the decent thing and give up money of his own free will. Possible, though not probable. Few seem to be weighed down by moral scruples.
Postmaster Nick Read is a rare example: he agreed to return a bonus linked to an investigation into assistant postmasters who had been wrongly branded as thieves.
Interestingly, the sum was distributed before the end of the investigation.
But as far as everyone knows, Paula Vennells, who presided over a policy of going after innocent postmasters, has not returned a penny of the five million pounds she earned in her seven years at the top. It is incredibly difficult to recover ill-gotten gains from executives. It’s much better not to dish them out in the first place.
There is a toxic corporate culture in which executives are treated as if they are a class apart, given huge amounts of salary and golden sendoffs regardless of failure or misfortune.
The Prime Minister and the Governor of the Bank of England are urging wage moderation to combat inflation, but leaders of blue-chip companies clearly don’t think this applies to them.
An audit of executive pay at FTSE 100 companies by our sister newspaper The Mail on Sunday this summer found that CEOs whose companies have fueled inflation and interest rate crises (such as banks, energy companies and supermarkets) raised more than £100 million last year. in wages and benefits.
In a particularly egregious case, the Treasury discovered that the CEO of bottling giant Coca-Cola HBC pocketed more than £500,000 over the last two years, as part of his £8 million total, to help him face the cost of living. Beyond parody.