Barclays feels fury of investor rights fight

By Steve Slater and Raji Menon - Analysis

LONDON (Reuters) - Barclays (BARC.L) shareholders vote next week on a controversial fundraising plan that is being seen as a test of how far investors will go to stand up for their traditional rights.

Barclays tried this week to head off a backlash from shareholders by selling them a slice of some lucrative capital instruments that had been earmarked for Middle East investors, but the country's top lobby group said it still had "grave concerns" about the plan ahead of Monday's vote.

The bank is not alone in risking shareholder wrath by offering other capital providers favourable terms.

Credit Suisse (CSGN.VX) and Italy's UniCredit (CRDI.MI) have also offered special deal terms to outside investors.

The moves have raised fears that shareholder rights will be a casualty of the credit crisis as banks scramble for cash.

Barclays executives effectively said "back us or sack us" by putting all the board up for re-election in April as part of this week's concessions. It also scrapped bonuses for directors.

But the moves failed to placate investors, who note the terms are not the same, as Qatar and Abu Dhabi investors are being offered warrants with their debt instruments.

"We were concerned about the pre-emption issue," said a top 20 investor in the bank, referring to shareholders' traditional right to first refusal on funding, which was swept aside in the Barclays plan in favour of the Middle East investors.