Standard Chartered has pledged to rethink how it pays its bosses after the bank suffered a damaging shareholder rebellion at its annual general meeting.
At the meeting in London 41% of shareholder votes opposed the pay policy for the next three years – a revolt that came close to legally forcing the bank to scrap its pay plans. The bank also faced hostile questions from individual shareholders unhappy about pay and other issues after a gruelling 2013 for the bank.
Based in London but operating in emerging markets, Standard Chartered suffered its first fall in annual profits for more than a decade last year. Its reputation as the star of Britain's battered banking sector was dealt a heavy blow when it was forced to pay £415m in fines over violations of US sanctions against Iran.
Chairman Sir John Peace told the meeting in advance of the vote that the bank had been in talks with investors and would continue discussions to make changes. He said new rules on executive pay, including the European Union's bonus cap, had made devising the policy difficult.
Though the bank technically won the vote, big investors expect companies to take note of large votes against pay and other governance issues.
After the vote was announced, a spokesman for the bank said: "Although we are pleased that all the votes on Standard Chartered's executive remuneration have been passed, we are clearly concerned that a significant minority of shareholders voted against the bank's new remuneration policy.
"We acknowledge their views, will reflect on them, and continue our dialogue with our shareholders and the governance bodies in order to address them properly."
Large investor advisory groups had called for votes against the pay policy because bonuses were heavily linked to targets that could be hit in a single year. Investors and regulators want banks to pay top managers over a longer time to discourage short-term risky behaviour.
Peace said the board had a difficult balancing act because it also had to comply with the EU rule limiting bonuses to 100% of salary, or 200% with shareholder approval.
Mike Porter, a small shareholder, criticised the lack of performance targets and said executive directors had earned large sums while shareholders had suffered in the last few years. "I do not see how shareholders have performed well when directors have had much more substantial pay rises. I think it is quite wrong."
Peace replied: "We certainly have not approached remuneration on the basis of enriching the bank or individuals. We have found this year's remuneration process very complex."
Another shareholder complained about rising bad debts and a "flaccid" dividend which he said indicated the board's lack of confidence. Peace said he was sorry if the shareholder was unhappy about the dividend but that the board was confident about the bank's long-term prospects in growth markets.
"I tell institutional shareholders it is the best bank in the world," Peace said.
In a trading update, the bank said market conditions were difficult and that income and profit fell in the first quarter of the year.
Company pay is in the spotlight at this year's annual meeting season – the first since business secretary Vince Cable required companies to give shareholders the binding vote on future pay policy as well as an advisory vote on the report for last year. Household goods maker Reckitt Benckiser and online grocer Ocado both suffered revolts at their AGMs on Wednesday.
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