EU banks consider paying senior executive salaries in shares

Barclays Bank and other financial institutions in the European Union (EU) are considering paying a substantial proportion ‒ or most ‒ of senior executives’ fixed salaries in the form of shares in a bid to assuage investors’ concerns about planned salary increases, according to media reports.

Starting next year, Barclays plans to give CEO Antony Jenkins and chief financial officer Tushar Morzaria part of their wages in shares in an attempt to maintain their overall compensation at close to the level of recent years, the Financial Times reports, citing unidentified people. The move is a response to a new EU rule for banks that limits bonuses.

The EU directive, which takes effect next year, limits bankers’ bonuses to a maximum of 100 percent of their fixed salary, or as much as 200 percent with specific shareholder approval. The new rule means many banks plan to sharply increase fixed pay levels for senior executives to prevent their overall compensation from dropping. Jenkins last year received £1.13 mn ($1.85 mn) in base salary, pension and other benefits as he gave up his bonus.

Barclays would pay most of the fixed salary in shares to persuade shareholders that any pay rise will ensure senior executives are committed to increasing the company’s value. The bank is still discussing the plan but aims to present it to shareholders next year, the FT reports.

Several other big banks across Europe are considering similar measures, the newspaper adds, citing pay experts such as Tom Gosling, head of PwC’s reward practice.

Barclays’ employees ‒ other than the CFO and CEO ‒ who are affected by the cap would be paid cash allowances that don’t count as bonuses under the cap rules, the newspaper further reports. It also cites an unidentified senior executive of a large Barclays shareholder as saying the shareholder would rather see the bank pay other staff affected by the EU cap in shares as well.