When the government announced Alison Carnwath’s damehood in the 2014 New Year honours list, it described the then Land Securities chair as a “role model for women in business”. So she was — the now 70-year-old financier was a rare female chair of a FTSE 100 company, and had blazed a trail as a woman in the City of London’s upper echelons over a career that has now spanned nearly 50 years.
But the commendation also specifically highlighted the principled stand Carnwath had taken on bonuses and pay issues, both at Landsec and at Barclays where she was the non-executive chair of the bank’s remuneration committee.
This would all have remained ancient history in my memory, had it not been for recent events at Italy’s UniCredit.
Last month, the (female) remco chair at UniCredit left the bank prematurely after skirmishes at board level and beyond over the pay of chief executive Andrea Orcel.
People familiar with the episode say that after the resignation of Jayne-Anne Gadhia — who had been the subject of unsubstantiated leak allegations by the bank — a new pay deal for Orcel was promptly hiked. UniCredit revealed recently that the former investment banker could earn nearly €10mn this year if he exceeds certain performance targets, an increase of 30 per cent (though the bank says performance restrictions, including less cash and more stock, are tougher).
The parallels between these cases are troubling and threefold. Back at Barclays in 2012, the chief executive was Bob Diamond, who like Orcel displayed an easy charm with a steely aggression not far beneath.
Both men have taken exceptionally high rewards for their performance in big banking jobs — Diamond’s bonuses and other Barclays-related rewards around the time of the financial crisis led then business secretary Peter Mandelson to brand him the “unacceptable face of banking”. It was his 2011 pay package — worth more than £24mn, including prior-year deferrals — that seemed egregious to many, especially given the bank’s poor performance and involvement in the Libor rate-rigging scandal.
Orcel has become similarly used to high pay after a long career in investment banking. At Merrill Lynch, where he spent two decades, his prodigious dealmaking secured him a spot among the bank’s top earners for many years. At UBS where he ran the investment bank, Orcel was another top earner and after his seven-year term he had accumulated more than $50mn in deferred stock. And then came the infamous row with Santander, the Spanish bank that wanted to hire him as CEO but then baulked at the cost of buying out that UBS stock: a lawsuit ensued, the latest ruling from which is that Santander must pay him compensation of €43.5mn
Diamond and Orcel were both confronted with strong-minded women as remuneration committee chairs. At Barclays, Diamond’s inflated pay infuriated Carnwath, who had argued for a zero bonus. Her views became public after the bank — and Carnwath in particular — were pilloried by shareholders at the Barclays annual meeting in May 2012 and she resigned shortly afterwards. Gadhia and her remco are understood to have agreed on a pay rise for Orcel, though not the 30 per cent increase that it later became. One banker familiar with events said Gadhia had been “a potential roadblock”.
Another crucial similarity between the Barclays and UniCredit cases was the role played by the two chairmen. At Barclays, Marcus Agius, an old-school relationship banker who struggled to rein in the hard-charging Diamond, backed the CEO over his remco chief. At UniCredit, chair Pietro Carlo Padoan, a former academic and government minister, took a similar stance. He told the Financial Times that Orcel had never “made any request to the board or remuneration committee with regard to increasing his compensation”, despite others saying that allies of Orcel lobbied hard on his behalf.
In Unicredit’s case the bottom line is that the bank is performing well under Orcel. The shares are up around 120 per cent since he was appointed nearly two years ago. And his strategic nous is widely acknowledged. But when governance standards appear to be under strain, things often end badly. It was only three months after the Barclays AGM showdown over Diamond’s pay — and in the wake of regulatory and political pressure over the Libor scandal — that he was forced to resign.
