Lloyds boss Eric Daniels waives £2.3m bonus - under duress

Lloyds insists its CEO deserved his full bonus - but he's apparently agreed to waive it. A wise choice...

Last Updated: 31 Aug 2010

Lloyds said this morning that CEO Eric Daniels has offered to waive his entire bonus (some £2.3m) for the second year in a row, to prevent the ‘excellent progress’ of the group ‘being obscured by the current debate on executive bonus awards’. In truth, after his counterparts at RBS and Barclays waived their pay-outs, Daniels probably didn’t have much choice. But what might seem rather more bizarre is that Lloyds is even having this conversation – and insisting Daniels was perfectly entitled to the full whack – in a week in which it may report gigantic losses of more than £5bn…

According to chairman Sir Win Bischoff, Lloyds was quite willing to pay Daniels his full bonus because of ‘his significant individual contribution, and the Group's overall performance, in 2009’. Now it’s true that Lloyds made good progress last year. It launched the biggest capital-raising ever seen in the UK, allowing it to avoid the Government’s asset protection scheme (unlike RBS). It cut a deal with the EU over the terms of its state aid. And it’s also been busy integrating the remnants of HBOS into its existing business. ‘Under the strong and focused leadership of our chief executive Eric Daniels, we shaped the business for future growth,’ Bischoff boomed.

But hang on a minute. The fact remains that on Friday, Lloyds is set to report a full-year loss for 2009 of somewhere between £3bn and £11bn (depending who you believe). How does that kind of ‘overall performance’ entitle the CEO to its full bonus? How much money would he have had to lose to see it chopped? Lloyds will argue, not unreasonably, that most of these losses are a legacy of HBOS’s dodgy loan book. But Daniels isn’t like Stephen Hester, who was brought in to RBS after the event to steady a sinking ship – he was at the helm when HBOS was acquired. It was his deal. And even if it does pay off in the medium term (as Lloyds keeps insisting it will), surely he should get his bonus then, not now? This just gives out completely the wrong message about how the scheme is structured.

Next in the firing line will be HSBC, whose top brass also waived their bonuses last year to appease public opinion. However, not only has it neglected to do the same this year (so far); it’s also proposing to ramp up the salary of its CEO Michael Geoghegan. Since it escaped from the recessionary ordure relatively unspattered, at least relative to the likes of RBS and Lloyds, you might argue that HSBC is entitled to do what it wants, and pay its top managers for their outperformance. But now Daniels and co have ducked out, that’s going to be even trickier to justify politically.

In today's bulletin:

Lloyds boss Eric Daniels waives £2.3m bonus - under duress
Gaviscon scam claims hard to digest for Reckitt Benckiser
UK managers: resigned to the recession?
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