New bonus debacle as Santander faces revolt
Investors urged to oust boss hit by sexism row and fat cat pay storm As we uncover a SECOND €40m payout pot – hidden in documents
SANTA ND ER vice chairman Bruce Carnegie- Brown is under fire over a botched attempt to hire a new boss at the bank amid a sexism storm at his other company.
Carnegie-Brown was at the centre of a plan to hire investment banker Andrea Orcel to run Santander. But the offer was withdrawn in January after the bank deemed Orcel’s ‘golden hello’ of more than €40 million (£34 million) unacceptable.
Shareholders are now being urged to hold Carnegie-Brown accountable for ‘deficiencies in the company’s hiring process’ and to vote him off its board at its annual shareholder meeting on Friday.
All of this comes less than a month after he was forced to address allegations of a toxic workplace culture at Lloyd’s of London where he is chairman. Financial media company Bloomberg found some women had been branded ‘totty’ and were given scores by male colleagues on a scale of one to ten.
Carnegie-Brown said the revelations had ‘shone a light’ on attitudes at the 333-year-old insurance market, based in Lime Street in the City. ‘We realise that we’ve still got a huge amount more to do on diversity,’ he said.
We can also reveal that the bank has asked shareholders to approve a €40 million pot – in an AGM resolution buried on page 91 of its 94page circular to investors – which will allow it to cover the cost of hiring top people who may be leaving behind shares and future bonuses. The bank insisted the pot was ‘ selectively available’ to pay to executives and other employees in a single year. But it is understood that it could, in theory, be used to provide a signing on fee to just one executive.
Carnegie-Brown is chairman of Santander’s remuneration and nomination committee in charge of executive pay, bonuses and appointing new bosses.
Influential corporate governance watchdogs are now advising shareholders to vote against his re appointment at Santander’s shareholder meeting. Glass Lewis and ISS are calling for his removal as a director over his part in the Orcel affair, saying he should be held responsible for the high street lender’s poor succession planning.
ISS pointed out that the debacle could prove costly for the bank. It has been reported that Orcel may take legal action against Santander.
Glass Lewis said it acknowledged the bank’s reasons for its U-turn over hiring Orcel and it demanded more details. It said ‘questions may be raised’ about Santander’s €40 million buy-out limit. Former Merrill Lynch banker Orcel is best known as an adviser of disgraced RBS chief Fred ‘The Shred’ Goodwin. He advised Goodwin on RBS’s disastrous takeover of Dutch bank ABN Amro in the lead-up to the financial crisis.
Santander withdrew its offer to Orcel earlier this year, saying it had not determined the full cost of the award when he was appointed.
The exact amount Orcel was demanding was never disclosed, but it is thought it was between €40 million and €50 million. Luke Hildyard of the High Pay Centre said a ‘football-style transfer market for bankers’ was emerging.
A spokesman for Santander said ‘the process followed and decisions reached were the right ones’ during the recruitment procedure and when considering the banker’s sign on bonus.
‘Indeed we believe that the processes and decisions show, if anything, the effectiveness of our board and its willingness to take whatever decisions are required in the best interest of shareholders, and to reconsider when circumstances change, no matter how difficult the circumstances.
‘Mr Carnegie-Brown’s role in the process was, in our view, impeccable and contributed to what we believe is proof of board effectiveness.’ Santander’s current chief executive, Jose Antonio Alvarez, was due to become chairman of the Spanish group when Orcel took the helm. Alvarez will now remain in post as the bank seeks out a replacement CEO.
The news emerges as Santander begins shutting 140 UK branches, putting 1,270 jobs at risk. The bank has also announced a €1.2 billion cost-cutting drive, with £85 million of cuts pencilled in for the UK, its third-largest market.
Santander’s annual report reveals it has pushed up the fixed pay of its top bosses to compensate for a cut in pensions. The firm reduced the annual contributions of its pension scheme from 55 per cent of base salary to 22 per cent to bring it into line with rivals.
However, this was accompanied by a hike in chairwoman An a Botin’s salary from €2.5 million to €3.2 million. Alvarez’s salary rose from €2 million to €2.5 million.
Bot in, daughter of former Santander chairman Emilio Botin, is one of the most powerful bankers in the world and has accumulated a pension pot worth €46 million at Santander. The Botin family has held the chairmanship of the bank for four generations.
Santander admitted at the time that Orcel’s bonus requirements had been ‘unacceptable’.
Glass Lewis said the payment of large signing on fees can reflect ‘ poor succession planning’ even though it recognised the ‘occasional necessity in facilitating recruitment’.
It added: ‘We believe the company has an obligation to provide transparent information on the procedures and events that led to the withdrawal of the appointment of Andrea Orcel.’