Lloyds Banking Group (LSE: LLOY) chief executive Eric Daniels has waived his annual bonus for the second consecutive year, and he said Lloyds' performance is in danger of being obscured by the current debate on executive bonus awards in the banking sector.
Daniels' decision follows similar decisions from fellow UK banking executives. Barclays CEO John Varley and chairman Bob Diamond set the tone last week, whilst Royal Bank of Scotland CEO Stephen Hester has also relinquished his £1.6m bonus.
Lloyds said its other executive directors will receive appropriate bonuses, which will be paid in shares and completely deferred until 2012. Similarly, annual bonus awards, where appropriate, will be paid across the group in shares. In all cases the bonuses are subject to deferral and claw-back in line with the G20 principles and as already agreed with the FSA and UKFI, Lloyds said.
Daniels was entitled to his full payout which is reported to be worth £2.3m. The company’s remuneration committee awarded this entitlement due to Daniels’ "significant individual contribution and the group's overall performance in 2009".
Lloyds Banking Group, approximately 40% owned by the UK Treasury, said that with 30m customers it can understand the financial hardships that many households and businesses are experiencing across the UK arising from the decline in the economy last year. Lloyds said it is playing its part in the UK's economic recovery, by helping customers and by extending a significant amount of new lending to businesses and households.
According to Lloyds chairman and head of the remuneration committee, Sir Winfried Bischoff, the company has built a strong platform in the past year, and it is well positioned to deliver value for shareholders, including the taxpayer, both in the near and medium term.
Bischoff said the committee carefully considered the principles of the annual bonus scheme, including sustainability, a prudent approach to risk, and progress on profitability and integration. According to Bischoff, the company is mindful of the ongoing public debate surrounding bonuses in the banking sector.
The chairman also stated that it is appropriate that his colleagues receive appropriate financial recognition when stretching performance targets, including both financial and non-financial measures, are met. According to Bischoff, Lloyds’ overall bonus allocation represents a very small percentage of the group’s revenues.
Lloyds expects to release its preliminary results on Friday 26 February 2010.
Disclosure: The author holds no positions in the company