NEWCASTLE, England (Reuters) - Multi-million pound pay deals for the chief of Barclays and other executives of the British bank are excessive and unjustified, Business Secretary Vince Cable said on Saturday, calling on its shareholders to take action to curb huge payouts.
But the government would not intervene over high payouts to executives at taxpayer-owned Royal Bank of Scotland, because it wanted to avoid micro managing the lender, rescued by a state bailout during the 2008 credit crisis, he said in an interview.
Barclays boss Bob Diamond took home pay, shares and benefits worth 17 million pounds ($27 million) last year, while two other unnamed executives were each paid more than 6 million pounds, the bank announced on Friday .
“These are pretty extreme levels of pay at Barclays ... they are excessive, it is very difficult to see how they can be justified,” Cable told Reuters at his centre-left Liberal Democrat party’s spring conference in Newcastle, northeast England.
“We are bringing in reforms to make this behaviour unsustainable, but that can’t be introduced overnight,” he said.
While the government has succeeded in nearly halving overall bonuses at RBS where it holds an 82 percent stake, it has little direct sway over privately-held banks like Barclays.
The reforms include plans for greater disclosure of top bankers’ pay and for shareholders to have more say over executive pay packages.
“We hope that transparency does have a restraint. It doesn’t appear to have on this occasion, but it also should be alerting shareholders to the position in the banks that they own and hopefully get them to take action,” he said.
The pay awards risk adding fuel to public anger against banks for failing to show restraint on pay for top staff when thousands of jobs are being cut and wages slashed or put on hold elsewhere in Britain after a recession many blame on the banks.
Cable is a long-time critic of high pay and bonuses for bankers, and led the charge for coming legislation requiring British banks to protect their deposit taking divisions from their riskier investment banking divisions.
RBS chief executive Stephen Hester and its chairman gave up million pound bonuses in January after intense political pressure on them to refuse the awards.
But Cable indicated that large awards made to other executives at the bank would be allowed to stand.
RBS investment banking chief John Hourican will receive almost 7.5 million pounds in pay, bonus and shares for last year, while Ellen Alemany, head of its U.S. business Citizens, could get 4.7 million pounds, the bank disclosed on Friday.
“We want the banks where the government has a shareholding to exercise restraint. We want them to be at the back end of salaries and bonuses, because overall in the industry it is far too high,” Cable said.
“(But) we don’t want to get into the business of micro managing the bank and setting the salaries of individual employees.”
He said there was a strong case for the government taking full control of RBS, rather than running it at arms’ length as at present, but said this was not currently under active consideration.
He said 100 percent ownership would enable the government to direct a “sufficient flow of funds to good British companies”, helping address a shortage of bank lending to small-scale firms he says is holding back the country’s economic recovery.
“My instincts are that, given the overall position of financial blockage, there is quite a strong argument for government taking advantage of its state shareholding in a proactive way,” he said.
Carving out a “British business bank” from RBS along the lines of Germany’s state-controlled development bank KFW or America’s Exim Bank to expand commercial lending and support exports remained an option, Cable said.
“We are trying all sorts of different things, so we should have an open mind as to whether an institutional change of that kind might help ... it certainly is a potential runner,” he said
Cable made the proposal in an internal government letter leaked last week, but later appeared to distance himself from the idea, and the idea was rejected by Conservative Prime Minister David Cameron’s spokesman.