The best thing Alison Carnwath could do at Barclays' annual meeting on Friday would be to resign as chair of the bank's remuneration committee.
Carnwath has held the post for less than a year, so it seems unlikely she would be keen to quit even if the vote against her re-election as a director approaches the rumoured 15%. But Barclays, after the chaotic and bitter build-up to this year's annual meeting, needs to make a fresh start on pay – and that would be best achieved if Carnwath stood down from the pay committee.
Barclays, remember, is an organisation that says it fully understands that pay arrangements in banking must change. "Compensation has to adjust to the new reality of lower returns for the sector," says chairman Marcus Agius. Part of the debate, then, is whether Barclays is adjusting fast enough in directing a greater share of the spoils towards shareholders and away from employees – and it's a large part of the job of Carnwath's committee to ensure that it does.
Last week's concessions (chief executive Bob Diamond and finance director Chris Lucas volunteered to make half their 2011 bonuses subject to the eventual achievement of an acceptable return on capital) were, in effect, an admission that Barclays got it wrong. If the remuneration committee had done its job properly, a panicky 11th-hour attempt to contain the level of shareholder revolt would not have been necessary. If Carnwath had been on the ball and had lived up to her reputation as a tough boardroom cookie, she could have insisted on such conditionality in the first place.
Instead her committee agreed simply staggering payouts to Diamond & co in a lousy year for the bank. The chief executive was awarded an annual bonus worth 200% of salary in a year in which return on equity fell from 7.2% to 5.8%. The financial performance was so far away from the ambition of 13% that Diamond himself labelled it "unacceptable". That judgment was reinforced by a graph that leaps from the pages of the remuneration report: £100 invested in the FTSE 100 index in December 2006 was worth £108 at the end of last year; £100 invested in Barclays shares became £29.
Yet the pay committee seemed incapable of grasping the basic point that handing a total of £17m to Diamond (that's ignoring the £5.7m "tax equalisation" handout) in this circumstance would be also be unacceptable to a large constituency of shareholders. The only alternative explanation is that Carnwath lacked the bottle to deliver some hard truths to the executives. Either way, appointing a new chair of the remuneration committee would be quickest way to try to repair the damage to the bank's relations with its owners.
Barclays is not alone in the banking world in dragging its feet on pay reforms. Citigroup's Vikram Pandit discovered that most shareholders disapproved of his pay last year; other US banks may also receive similar messages. But the fact that the banking industry as a whole finally seems to be exhausting the patience of shareholders is not a reason for Carnwath to cling on.
