Standard Chartered has cut the pay packages of its top two executives by £384,000 in an effort to quell investor unrest over the size of their pension allowances.
The emerging markets-focused bank said Bill Winters, chief executive, had agreed to halve his pension allowance from next year, taking it from £474,000 to £237,000.
Andy Halford, the lender’s chief financial officer, will also see a 50 per cent cut, taking his allowance from £294,000 to £147,000.
The Financial Times reported last month that Mr Winters was planning to accept the voluntary pay cut.
The move comes after he attracted criticism in July after using an interview with the FT to hit out at “immature and unhelpful” investors that had protested against his pension allowance.
StanChart has been holding discussions with investors over Mr Winters’ pay since the bank’s annual meeting in May, when almost 40 per cent of shareholders chose not to back the lender’s remuneration policy. It was the biggest protest vote against a large British-based bank since 2014.
Following Mr Winters’ remarks in the interview, StanChart’s chairman José Viñals became involved in the negotiations with shareholders, according to people briefed on the discussions.
The London-based bank said on Friday that neither executive would receive an increase in the other components of their pay package to compensate them for the lower pension allowance.
Christine Hodgson, chair of the remuneration committee, said: “I would like to thank Bill and Andy for their willingness to agree to these changes and to thank our shareholders and their representatives for engaging constructively.”
Schroders, one of StanChart’s largest shareholders, said it supported the changes.
“We are pleased that the company has listened to shareholders and are very supportive of this move, which brings CEO and CFO pension arrangements into line with the broader workforce, consistent with emerging UK best practice,” said Daniel Veazey, head of corporate governance analysts at the fund manager.
New measures to restrict pensions tax relief for high earners were introduced in 2016, with the annual allowance tapering down from £40,000 to £10,000 for those with incomes of more than £110,000. The reforms prompted many large companies to pay their executives a pension “allowance” — a lump sum of cash, typically paid as a salary top-up, that can be spent on anything without restriction but is taxed like other income.
StanChart said it would continue to use a controversial method to calculate pension allowances, which combines an executive’s cash salary with a share-based payment of the same amount to arrive at a “total salary” figure.
The bank said Mr Winters’ and Mr Halford’s new lower pension allowances were equivalent to 10 per cent of their total salary.
Most other large listed UK banks and many other FTSE 100 companies work their pension allowances out as a percentage of cash salary alone. By this yardstick, StanChart’s new pension allowances are equivalent to 20 per cent of cash salary.
Shareholders welcomed the reduction in pension benefit but said they continued to have concerns about the method used to calculate the total salary figure.
“The calculation is irritating, but they have come down quite a lot and that is the most important thing,” one top-20 shareholder said. “I don’t know what they are trying to achieve with keeping the misleading definition of salary. I also don’t know why they took so long to make the announcement — it’s the last possible day they could have made the change because it is six months after the AGM.”
Another top 20 shareholder added: “It is a big climbdown from where they were and a welcome change in tone. We are continuing the dialogue with them on the salary vs fixed pay basis of calculation.”
Mr Winters’ lower pension allowance puts him in the middle of the pack compared with the other large UK banks. RBS’s new chief will receive a pension allowance equivalent to 10 per cent of cash salary, the same as the CEO of HSBC, whereas Lloyds and Barclays pay their CEOs 33 per cent and 34 per cent respectively.
The Investment Association, a body representing fund managers, recommends that executive pension allowances be brought in line with the wider workforce, for whom contributions tend to be capped at about 10 per cent.
Additional reporting by Josephine Cumbo
This article has been amended since original publication to highlight the correct pay package cut figure
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