After two years of going without bonuses as a mea culpa for the financial crisis, the chief executives of the U.K.'s biggest banks are signaling they will take their payouts this year.
Their decisions come amid public and political anger over banker pay. While some of the heat over compensation in the U.S. has subsided, in the U.K. it has continued full throttle, despite the bonus refusals last year by top bank officials and the return of U.K. banks to profitability.
It also is the end of austerity for embattled Bank of America Corp. Chief Executive Officer Brian Moynihan, despite the company's $2.2 billion loss in 2010. Mr. Moynihan will receive roughly a 67% bump in his total compensation for 2010.
In the U.K., Stephen Hester, chief executive of 83% state-owned Royal Bank of Scotland Group PLC, is expected to receive about £2.5 million ($4 million), not including payouts from share-incentive plans that could more than double that, according to a person close to the matter. He walked away last year from a £1.6 million bonus awarded by the bank's board, in an effort to deflect criticism of the bailed-out bank.
Barclays PLC CEO Robert E. Diamond Jr. could receive as much as £3.4 million, in addition to payouts from long-term share-related deals, according to details of his contract in public filings. Last year, as the head of Barclays's investment bank, he and then-CEO John Varley waived their bonuses, too.
The departing CEO of HSBC Holdings PLC, Michael Geoghegan, could receive as much as £4.28 million in bonus, in addition to other perks, a bank spokesman said. Last year, he donated his bonus to charity. Outgoing Lloyds CEO Eric Daniels is entitled to get about £2 million for 2010, according to a bank spokesman; he waived his bonus last year.
Representatives for the banks said no final decisions on 2010 compensation for executives have been made.
The bankers' decisions will be a barometer of the degree to which banks have returned to business as usual in the U.K., two years after the government spent tens of billions of pounds to stabilize its financial sector.
The banks have sent signals that they think it is time for them to accept their bonus pay. During recent public testimony, Mr. Diamond was asked repeatedly if he would waive his bonus for 2010 and declined to answer, saying instead that the "period of remorse and apology" for banks should end.
Despite the overall size of any employee's payout, new European Union rules strictly dictate the amount of upfront cash a banker can receive. That amount is capped at between 20% and 30%, with the rest paid in shares and deferred compensation.
The U.K. government and public appear preoccupied with banker payouts, more so than in the U.S., where bonuses are two to four times what U.K. executives are expected to get.
Mr. Moynihan got an award of restricted stock valued at $9.05 million, according to a company filing. His total stock and salary in 2009 as head of consumer banking was $6 million, before he became chief executive in 2010. He received no increase in his base salary of $950,000.
The board decided to award bonuses at the end of such a challenging year because Mr. Moynihan and his team "did a lot of good stuff that doesn't show up on the bottom line," a spokesman said.
Goldman Sachs Group Inc. CEO Lloyd Blankfein was just awarded restricted stock valued at $12.6 million based on the company's recent stock price, a 40% increase from Mr. Blankfein's bonus in 2009. At Morgan Stanley, Chief Executive and President James Gorman got about $7.4 million in restricted stock and options for 2010, down 12% from the $8.5 million stock award that he got a year earlier.
Members of Parliament grilled U.K. bankers about how they justify their industry's high salaries. Business Secretary Vince Cable recently urged bankers to show "real restraint" and has threatened to bring back last year's bonus tax. Meanwhile, George Osborne, the U.K.'s treasury chief, is promising an end to the political bashing if bankers agree to certain lending targets.
"In the U.S., the culture sort of expects high pay," said Mark M. Reilly, a compensation consultant based in Chicago. "In London and the rest of Europe, it is just not as acceptable to have the huge gap between the average employee and the CEO."
People close to the banks said some of the executives, especially at RBS or Lloyds, which still are partially owned by the government, may try to strike a balance by donating some of their bonuses to charity or taking the payouts in shares to illustrate commitment to the bank's future performance.
It isn't just top executives' payouts in the cross hairs, but overall bonus awards. Analysts and people close to the U.K.'s banks said overall bonus pots will be flat to down compared with 2009.
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