|17 July, 2019

Where is StanChart's chair when he's most needed?

The American CEO’s criticism of shareholders who attacked his pay as “immature” was a textbook example of the very behaviour he decried

Standard Chartered PLC Group Chief Executive Bill Winters attends the China Development Forum in Beijing, China March 23, 2019.

Standard Chartered PLC Group Chief Executive Bill Winters attends the China Development Forum in Beijing, China March 23, 2019.

Reuters/Thomas Peter

LONDON - Rule one of crisis communications: when in a hole, stop digging.

Alas, Bill Winters, the usually unflappable boss of Standard Chartered, has brandished a backhoe after falling into a cavity over pay. But the $29 billion bank’s board, led by José Viñals, sets remuneration. Having failed to sell the compensation deal in the first place, the Spanish chairman should be the one deflecting shareholder discontent.

The American CEO’s criticism of shareholders who attacked his pay as “immature” was a textbook example of the very behaviour he decried. Some investors were peeved at Winters’ high pension contribution – equivalent to 40% of his cash salary. That breached UK Investment Association guidelines that such payments should be in line with the rest of the lender’s workforce, at around 10%.

If StanChart had a good defence for Winters’ pay, it shouldn’t have come from the recipient, whose response now looks self-interested. That is, after all, one of the stronger arguments for separating the roles of chairman and CEO – a UK norm that most of Winters’ U.S. rivals reject.

There is plenty for chairman José Viñals to answer for. He approved a poorly managed change to “simplify” StanChart’s new pay structure by combining salary and fixed share-based remuneration into a single “total salary” figure. One consequence of the transition to this bespoke metric was that Winters’ pension allowance came down to a more digestible 20%, without him losing a single penny.

A comparison with peer HSBC is instructive. In March, CEO John Flint voluntarily reduced his pension pay from 30% of his base salary to 10%, attracting investor approval. Doing the same would cost Winters around 355,000 pounds, relatively small beer given his 2.4 million pounds total salary.

The risk of Winters’ poor choice of words is that shareholders who had supported the new policy may now change their minds. Despite Viñals consulting most of them, around a third of StanChart’s investors still voted against the pay policy at the lender’s annual meeting in May. Viñals is now considering further tweaks. But given Winters’ deepening hole, that help has come too late.

CONTEXT NEWS

- Five top shareholders in Standard Chartered told the Financial Times on July 16 that they were unimpressed by boss Bill Winters’ decision to describe shareholders who attacked his pay as “immature”.

- One big asset manager who remained anonymous described Winters as “tin eared”, the newspaper reported.

- Winters’ comments came after almost 40% of StanChart’s shareholders declined to back the lender’s new remuneration policy at its annual meeting in May. The protest vote followed investor anger over a change in the way the Asia-focused group calculated pensions for top executives.

- “Picking on individual pension arrangements … and suggesting that there is some big issue there is immature and unhelpful,” Winters told the FT on July 15.

- He is set to receive a pension cash allowance of 474,000 pounds this year which StanChart says is equivalent to 20% of his total salary. That figure was the result of a controversial change in the methodology the bank used to calculate executive pension allowances.

(Editing by Rob Cox and Bob Cervi)

© Reuters News 2019

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