Lloyds faces investor revolt over CEO’S pay

Shareholder advisory firm ISS criticises lender’s ‘complex’ approach to setting executive wages

LLOYDS boss António Horta-osório is facing a revolt over his pay after an influential shareholder advisory firm urged investors to oppose the lender’s remuneration policy at its annual general meeting next week.

In a report to investors, Institutional Shareholder Services (ISS) criticised Lloyds’ process for deciding executive pay as “unduly complex”.

Mr Horta-osório was the highest paid boss of a UK high street bank last year, raking in £6.4m in a mix of pay, bonuses and long-term incentives. His pay packet rose 11pc on the previous year. The majority of Mr Horta-osório’s pay was in awards under Lloyds’ share ownership plans, determined according to an array of company and individual targets that ISS called “unwieldy and unnecessarily complex”.

While ISS did not criticise the level of Mr Horta-osório’s pay explicitly, it hinted it thought it was too high, saying: “ISS has calculated that the CEO’S pay is 95 times that of the average employee in the organisation.”

It also criticised the 2pc increase in Mr Horta-osório’s basic salary to £2.8m last year, noting it had followed 8.4pc and 6pc increases the previous two years without “adequate explanation”.

The Lloyds chief earned more than the other bosses of the big four UK high street banks last year.

Outgoing HSBC chief Stuart Gulliver was next at £6.1m, followed by Barclays boss Jes Staley (£3.9m) and Ross Mcewan at RBS (£3.5m). The average pay for a FTSE 100 chief executive is £4.5m. George Culmer, Lloyds’ chief financial officer, earned 9pc more at £3.3m, while chief operating officer Juan Colombás, who was promoted during the year, earned 12pc more at £3.3m.

In a statement, Lloyds said it was “surprised” by ISS’S opposition to its remuneration policy. It added: “We do not agree with the assertions made within the ISS report as the group makes a high level of disclosure on the framework it operates.”

Fellow shareholder advisory firm Glass Lewis has recommended investors endorse the remuneration report. Last year, Lloyds’ pay policies were passed with 97pc support at the AGM.

Mr Horta-osório has described 2017 as a “landmark year” for Lloyds after it returned to private ownership when the Government sold the last of its 2008 bailout stake for a small profit last May.

It also announced a 20pc increase in its dividend and a share buyback of up to £1bn, equating to a total payout for investors of up to £3.2bn. The average Lloyds employee received a salary increase of 2.7pc last year.

Separately, Lloyds announced yesterday that it had offloaded a £4bn Irish mortgage book to rival Barclays as part of its strategy to refocus on the UK market. The lender’s ill-fated foray into the Irish home lending market was partly to blame for its near-collapse during the financial crisis, leading to a government bailout.

Lloyds said the sale of the mortgage book for £4bn to Barclays would leave it with “minimal exposure to Ireland” and boost its capital buffer by 25 basis points.

Ian Gordon, analyst at Investec, said the deal strengthened the case for Lloyds to increase its dividend from 3.05p last year to up to 4.1p.