Lloyds Banking Group reduced its bonus pool by approximately 3% to £365 million in 2012, and will not increase salaries in 2013.
The group’s 2012 Annual reports and accounts showed the greater impact of this reduction was applied to senior staff, and managed in the context of business and individual performance.
It also showed that salary rewards were limited in 2012, and frozen at more senior levels for the second year running, to reflect the continuing challenging economic environment.
The awards under its group bonus scheme remained at 2%, which represents approximately 7% of pre-bonus management profit before tax, compared to 12.5% in 2011.
Winfried Bischoff, chairman at Lloyds Banking Group, said: “We have made no changes for 2013 in senior executives’ pay (with one exception) and our incentive compensation for 2012 in absolute amount and as a percentage of revenues (less than 2%) is lower than that of any other major banking institution in the UK.”
Cash bonuses were capped at £2,000 per employee with additional amounts paid in shares and subject to deferral and performance adjustment. The average value of bonuses paid per employee was less than £3,900, similar to 2011.
Bonus awards for executive directors will continue to be deferred into shares until at least 2015. Long-term incentive plan (Ltip) awards have not been made for executive directors in any of the last four years.
However, Antonio Horta-Osorio, chief executive at Lloyds Banking Group, has been awarded £1,485,000 in deferred shares. The deferral period of this award will be extended to five years, so these will not be released until 2018.
Bischoff added: “We continue to believe that the remuneration policy, at all levels, including for senior executives, needs to incentivise staff to deliver strong, sustainable growth while reflecting the work required to reshape and transform the group.
“We have a strong conviction to align reward to the longer term, sustainable success of the business and through this the return of value to shareholders.”
Anthony Watson, chairman of the group’s remuneration committee, added: “Our aim is that, from 2014, we will implement a restructure of our package which will more effectively recognise the connection between the impact of short-term and long-term goals in driving forward our business, and will also further facilitate the adjustment of awards for malus.”