Standard Chartered's cop-out on bonuses

Standard Chartered Shanghai Towers

Mystery number one at Standard Chartered is why chief executive Peter Sands was awarded a bonus in the first place. Sands, in common with all executives apart from new-ish finance director Andy Halford, has waived his award to “show leadership”.

Very sporting, but surely the role of leadership on bonuses falls to the pay committee. Relying on the bosses do the decent thing is a cop-out, particularly for a bank that has suffered a few rebellions over pay in the recent past.

Let’s hope Ruth Markland, Standard Chartered’s remuneration chief, explains all in the upcoming annual report. In last year’s she set out the main measures for executive bonuses in 2014 but Standard Chartered flunked on all counts. The share price fell 29% in the year, so even a same-again dividend couldn’t rescue the total return to shareholders. Earnings per share were down 28% on a “normalised” basis. And return on risk-weighted assets plunged from 2.2% to 1.6%. How are the waived bonuses meant to have arisen?

Mystery number two is the status of Sands’ assertion that “there are no plans to raise new capital”.

On the face of it, it’s what shareholders wanted to hear, and Sands, to be fair, described how a rights issue can be avoided. Some $1.8bn of costs are being removed and the asset base is being derisked, thus there is a credible target to improve the core capital ratio from 10.7% to 11%-12% this year.

But Sands will be chief executive only until June. Is Bill Winters, the new boss, tied by the same strategy? “We didn’t have time to wait for Bill,” said Halford. “It’s full pedal to the floor.”

That was a diplomatic answer. Sands’ final revving of the engine is commendable as far as it goes, but the reality is that all is uncertain until Winters has looked under the bonnet.

Ups beat downs at ITV

It’s hard to find fault in ITV’s fifth year in a row of double-digit profit increases, but let’s try. Share of viewing was down 5% in 2014. ITV Studios, the production division, saw a 4% fall in revenues in the UK on an “organic” basis. And aren’t those big entertainment formats – the likes of I’m a Celebrity and Ant and Dec’s Saturday Night Takeaway – looking a little long in the tooth?

But that’s about as far as the nit-picking goes after a 23% rise in pre-tax profits to £712m. Indeed, there are semi-explanations on the points above. On viewing, ITV merely gave back what it gained in 2013 under pressure from a strong BBC. Studios in the UK were affected by a year of World Cup football but the overseas revenues still motored. And those old formats still get good audiences and still sell overseas; even the Australians are taking Celebrity, although it is filmed in South Africa, oddly.

In other words, ITV’s remarkable progress continues. One of chief executive Adam Crozier’s challenges is how to distribute the winnings. For the third year in a row there is a special dividend (worth £250m this time) on top of an ordinary that was lifted by a third with the promise of increases of at least 20% in the next two years.

The series of specials has not strained the balance sheet. Far from it. There was net cash at the year-end of £41m, even after spending £214m on acquisitions. ITV even finds itself wanting more balance sheet “leverage” – meaning debt – in the interests of financial efficiency.

Don’t expect fireworks, however. The leverage will arrive “gradually” and Crozier reserves the right to tweak the mix between acquisitions and special dividends as he wishes. Talks with Talpa, the Dutch production company behind The Voice, continue, for example.

The only real cloud is that audience share figure. For now, though, it’s having little impact on advertising revenues, probably because ITV maintains a stranglehold on shows with mass audiences on commercial TV. Ad revenues in the first quarter should rise a handy 11%.

Liberty Global paid £481m, or 185p a share, for its 6.4% stake in ITV last July. The share price now is 233p, so that’s a £125m profit so far. Maybe Liberty’s John Malone wasn’t on the prowl for a bid and just spied an investment opportunity.

Tesco diversity

You don’t have to be a Unilever man to work at Tesco, but it seems to help. Here comes another one. Byron Grote is an oil man by trade but he’s about to complete nine years as a Unilever non-executive. In May, he’ll be a Tesco non-exec.

Grote will join Patrick Cescau, former Unilever chief executive and now Tesco’s senior independent director, and, of course, the big recruit from the world of deodorants and margarine, chief executive Dave Lewis. “Our policy is to find, develop and keep a diverse workforce at all levels within our company,” said the last Tesco annual report. Of course.

Powered by article was written by Nils Pratley, for The Guardian on Wednesday 4th March 2015 19.40 Europe/London © Guardian News and Media Limited 2010


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