Barclays’ chief executive, Antony Jenkins, told the Telegraph newspaper in Britain that he decided to increase bankers’ pay last year in spite of falling profits to avoid a “death spiral” in the investment bank unit, where the rate of attrition among senior bankers last year doubled.
The paper said that about 700 people had left the American bank. About 10 percent of its senior directors had jumped ship last year after pay was cut in 2012. The bank’s annual report, released on Wednesday, confirmed worrisome attrition levels.
“We were faced with a very difficult decision for me personally as chief executive and for the board because we are absolutely committed to driving the level of compensation down in the investment bank,” Mr. Jenkins said in a Telegraph article published Wednesday.
In early February, Barclays announced that it was increasing its bonus pool even though it was cutting jobs and other expenses.
In its latest annual report, the bank said it said aside £2.5 billion for 2013 bonuses, but tried to present the numbers to show how that the pool was actually down 18 percent from the previous year.
That’s because Barclays clawed back or made other adjustments totaling £290 million in 2013 for inquires related to payment protection insurance and interest rate hedging products.
In 2012, however, the claw back and other adjustments were much bigger – totaling £860 million — mostly related to “conduct” issues related to settlements involving the rigging of the London Interbank Offered Rate, or Libor.
In essence, the bank is arguing that because people behaved a bit better — or not as bad — in 2013 when compared with the previous year, the bonus pool grew.
The bank was also quick to point out that 2013 bonus levels were down 32 percent compared with 2010 levels, when the bank started to examine its pay policies. Investment banking bonuses are down 41 percent from 2010, Barclays said.
Mr. Jenkins has been welcomed as a reformer, but the interview appears to undermine his tough talk about changing Wall Street culture, which many critics have long-argued originates from disproportionately high pay levels (they are not inventing the Internet or curing cancer, the argument goes).
At the same time, Mr. Jenkins says that the bonus decision was “the hardest” one he has had to make, even though he has had to fire tens of thousands of people and confront investigations into manipulation of interest and foreign exchange rates and the inappropriately sale of insurance products.
He seemed willing to wade into the hornet’s nest about how long bonuses should be awarded over long periods, telling The Telegraph that he disagreed with deferring payments longer than three years.
Policy makers in Britain have been hammering the idea that longer deferrals will provide an incentive for better conduct.
“There comes a point where the deferral levels for an individual become almost meaningless,” Mr. Jenkins said. “If you say to somebody I am going to give you a bonus but you don’t get it for 10 years, that person is going to say: ‘That is not worth anything to me and so it won’t change behavior at all.’ ”
About 68 percent of total bonuses were deferred at Barclays’ investment bank, down slightly from 69 percent the year before. The closely watched compensation to net income ratio rose to 44.1 percent, from 40.3 percent the prior year.
Top pay in investment banking, however, is still significantly less than some of the payouts in private equity. For instance, Leon D. Black and two of his co-founders at Apollo Management made more than $1 billion collectively last year.