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[May 18, 2014]
Shareholders rebel over executive pay at Standard Chartered
(Guardian (UK) Via Acquire Media NewsEdge) Standard Chartered is under pressure to back down on executive pay and overhaul its communications with shareholders after a rebellion at its annual general meeting.
Investors said the bank had failed to consult them properly about new bonuses for chief executive Peter Sands and other top managers. The botched communication led to a 41% vote against its pay policy.
Leading shareholders said the vote should be a wake-up call for the board. After weathering the financial crisis, Standard Chartered was regarded as a star of the British banking industry. But after problems including a profit warning and pounds 415m in fines for breaching US sanctions against Iran, shareholders accuse it of complacency and not being alert to shifts in sentiment.
A top 20 investor said: "The profit warning and a string of negative surprises took the halo off the management team's aura of invincibility and opened it up to criticism, and I don't think they have handled it very well." The shareholder revolt was aimed at bonuses linked to targets that could be hit in a single year. Investors and regulators want banks to pay top managers over a longer period to discourage short-term risky behaviour.
A top 10 investor said there was disquiet over other matters such as the large number of executive directors on the board, chairman Sir John Peace's dual roles as chairman of Standard Chartered and fashion group Burberry, and the lack of independence of some non-executive directors. "If you are making the decision to pay your directors at a certain level, you have got to go and engage with your shareholders. Their long-term problem is that if they don't start engaging with their shareholder base they are going to lose more support." Investors compared Standard Chartered's approach with that of HSBC. When HSBC realised investors were unhappy about a potential pounds 2.25m bonus for chairman Douglas Flint, it held talks with shareholders and staged a partial climbdown. However, Standard Chartered failed to head off discontent before its AGM and came close to losing a binding vote on pay.
Another investor said: "It was like they were making it up as they went along. They didn't communicate effectively or show any clear thinking behind their approach." Although the pay policy was passed, investors expect the bank to come back with revised proposals.
Standard Chartered said: "We actively solicit and react to all feedback from our shareholders, and hold an extensive programme of meetings between shareholders and a range of senior management. At the beginning of May we had already undertaken over 150 meetings among our top 25 shareholders, while in 2013 we had 270 meetings among the top 25." One investor said the bank did not communicate properly and 'it was like they were making it up as they went along' (c) 2014 Guardian Newspapers Limited.
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