Here’s a graph showing dividend and share price performance for Barclays shareholders normalised to 2005. Contrast this performance with the pay:income ratio at Barclays Capital, again normalised to 2005. This is not a graph you’ll find in a Barclays annual report or a Bob Diamond presentation.
As an interesting aside, when cantankerous was at business school, half of those offered places by Barclays on its ‘Global Leadership Programme’ had failed either their Corporate Finance or Accounting exams (and in some cases both). It was pretty hard to fail those exams but Barclays was either too incompetent or disinterested to check. Now these same people, some of whom couldn’t perform a simple NPV calculation or create a balance sheet for a second-hand car dealership, are supposedly masters of the universe worthy of six-figure salaries and similar bonuses. Bizarre.
Barclays performance 2005-2010 delivers for staff but not shareholders
This is a fascinating graph. Can you identify the source of the numbers. I would like to quote/present/link to this graph in future if it is backed by some credible references.
By the way. Good blog in general.
Tim,
The numbers are from the Annual Reports on the Barclays website (look in the Income Statements). The share price is from the Barclays website too (it has a facility to download the share price history) – I used the share price on the day the final divi was paid. I’ve sent you the spreadsheet by email. I could have done something much more sophisticated, and might do later, but wanted to get something up quickly.
Glad you enjoy the blog.
Presumably the purpose of this exercise is to show that shareholder value tumbled, whilst the pay to income ratio hardly budged.
Why this should surprise or impress anyone confounds me.
Make the proposition that Revenue was proportional to Net Income (which in turn is the value paid out to shareholders); I have not got looked at the financials to verify. In that case, since the pay ratio is fairly constant, then Pay itself would also have decreased proportionally with Net Income. “Pay drops in line with share performance!”: not much story there.
Even if the numbers did show that shareholder return had dropped whereas employee remuneration was static, why should this surprise anyone? If you know anything about banks, you will know that the vast majority of staff are on compensation packages that are dominated by a fixed component and have little variable element. ‘average’ pay as published with great fanfare in the media is hugely distorted by the fat tail of front office traders and management.
As to the interesting story, well I’m not sure how this is that interesting either. Saying (or at least implying) that people who go into banking should at least by good accountants is like saying people who make good doctors should also make great nurses. Speaking from personal experience, I’ve seen plenty of colleagues who can prepare T-accounts and journal reconciliations spotlessly who have not the first idea about how to make money in banking. In case you think I’m making this up, I am a qualified ACA who got fed up ticking financial accounts with different coloured pens and did what most complainers should have done: I applied and got a job in banking.
How about a graph showing how Barclays share price and dividends performed before Bob Diamond joined Barclays, and since? From 1990 onwards, say.
It should look like a pretty steep slope upwards, and then (since Bob joined) flat or downwards.
Coincidence?
It’s a very revealing graph and highlights that, whilst the pay committees at Barclays have been focussed on retaining ‘the best and the brighest’ who have showed foresight and diligence. In the face of all other Western banks suffering from the contraction in inter-bank lending as a result of the loss of confidence in AAA rated CDOs and CDSs (AKA toxic debt), Barclays human resource avoided all these problems…or is that just a bad joke. Quatari sovreign wealth fund capital injection followed by GB taxpayer guarantee and QE seem to have been converted very efficiently into bonuses and the lack of competition in the UK banking sector doesn’t seem to have done them any harm either.
Ray, I don’t know what graph you’re looking at, but the one at the top of this page shows that it’s the pension fund managers and other major ‘guardians’ of shareholder value are complicit in the con that is taking place. Explaining how ‘average wages’ are calculated is pretty desperate and simply highlights that, yes, the only people who will protect the corruption and blatant abrogation of responsibility in favour of feathering their own bank accounts are those on the payroll [i]at a certain level[/i].
That it’s not illegal for pension fund managers not to step in and show due diligence for profits being so radically siphoned off as bonuses because of the ‘performance’ of these chumps, is the thing I am left baffled by. Really it is a system so sick it is simply is no longer fit for the purpose of greasing the wheels of real industry.
Blogs like this will, hopefully, illustrate simply and plainly what is going on to people, like me, with no financial training.
Unfortunately, those in charge here in the UK are utterly compromised and conflicted, as evidenced by George Osbourne’s pronouncement that naked short selling isn’t ‘A Bad Thing’(http://www.guardian.co.uk/commentisfree/2011/feb/15/condemns-naked-short-selling-not-treasury), when even the laissez faire US regulators have banned it. The tax heist of the century is being engineered as we speak between multinational tax experts, the government and HMRC and we, the people, who produce children, pay our taxes as required by law are told that we’re ‘all in it together’. Well, yes, the people, the vast seething mass of us are in it together. And we can see exactly who is at fault, and it’s becoming clearer day by day…
James, please do explain to me why you think that somehow shareholders are being screwed by management. Nobody forced them to hold stock in Barclays, and nobody forces any existing holders of the shares to continue doing so. The implication of what you are saying is that Qatar decided to buy into Barclays out of a sense of charitable good will for all the fat cats and trading desk spiffs, or a blind ignorance of how Barclays uses its revenues. It’s laughable that you would even suggest this. If anything, you should be delighted that foreign investors are getting (in your view) a raw deal. They basically put money into the UK and got screwed (in your view) by UK staff, who pay taxes for the most part, in the UK, subsidising presumably yourself.
You seem to support this this strange conspiracy theory that pension fund managers are all in bed with bankers and continue to bankroll them out of some sense of cameraderie. Excuse me, but this is ridiculous. There is next to no sense of charity or fellow back-scratching; I’d have thought the opposite stereotype of financiers all trying to screw each other over would be more believable. Fund managers pick their stocks based on a variable combination of their mandate (given to them by their investors), and stock selection based on amongst other factors, their performance and P/E ratios. That the fund managers continue to hold bank stocks reflect that the shares **remain adequate value**. If you don’t like how your pension manager picks his stocks, find a manager who does.
I’m sorry you found my explanation of how remuneration costs work so ‘desperate’. I’d like to know what you consider desperate about it. I’m not justifying bank payrolls, I happen to agree with most people that bankers are overpaid for what they do. If you read my post properly, you’ll see that I’m justifying why payrolls are not necessarily a direct multiple of Revenue. This is pretty obvious, but something that seems to have evaded the original poster.
If Payroll = Fixed Pay + (n * Variable Revenue), then unless Fixed Pay is very small, which it isn’t particularly for lower-paid staff, then Payroll will not be proportional to Variable Revenue.
Let me at last come to short selling. You are at once attacking the fact that short selling happens, and also attacking the fact that pension fund are long the same stock. Please make up your mind which view you have. Short sellers do exactly what you yourself should be doing, as someone who feels that shareholder value is being ripped off by management overpaying staff. If you don’t like that stock, then take the opposite view and sell it. Let me also take a point on short selling. It’s IMPOSSIBLE to have someone take a naked short view, without someone else taking a naked long view. Because simply if you’re shorting, your counterparty is buying. So what is your big objection here? Since you’re so confused here, let me suggest a reason why naked short selling was banned in the US. It was because simply markets were falling rapidly in 2008 and regulators needed to prevent a freefall where true price discovery was being overwhelmed by an influx of speculative trading. In normal markets short selling helps accelerate price discovery, which actually helps investors wanting to go long the stock.
Lastly, let’s come to this theory that the HMRC and Goverment are out there to steal your money. Erm let’s see. Taxes raised don’t directly go to HMRC staff. They also don’t go to your government ministers (well not much, in the grand scheme of things). So where do the taxes go? Back to you, the taxpayer, in the form of government services or corporations, owned by who? Well, for the most part, they’re owned by you, the pension fund holder. You may disagree with how the government spends your money but to say they are stealing it belies a lack of understanding of any economics.
“No. Betting companies like winners. They will have plenty of losers to cover. Bit like a casino, they like winners, giving them free meals & drinks etc. It is good PR for other players.”
[...] Board. Agius didn’t, and couldn’t, control the culture of greed at the bank and the remuneration committee at expense of both the public and shareholders. That the Board thought that Diamond giving up [...]
It is rare to find people who know what they aare talking about. When it comes to the stock market.