Metro Bank is at risk of a shareholder rebellion over executive pay, after an influential investor advisory firm said the high street lender had failed to justify a “significant” 20% salary hike for top bosses.
Glass Lewis – which helps shareholders including large pension funds and asset managers decide how to vote at annual general meetings – urged investors to vote against the bank’s remuneration report amid concerns over rising payouts for the chief executive, Daniel Frumkin, and the newly joined chief financial officer, James Hopkinson.
“Absent a sufficiently compelling rationale, we cannot recommend that shareholders support this proposal at this time,” Glass Lewis said.
It comes after Metro Bank offered Frumkin a 20% hike in his base salary, saying his pay was “increasingly out of line with others in the market” and that he was playing a crucial role in reviving the bank’s fortunes, after it was rocked by an accounting scandal in 2019.
While Frumkin has waived the increase by a year – meaning it will take effect from January 2024 – it will take his base pay from £769,600 to £925,000 next year. Frumkin was paid £1.3m for 2022, including bonuses.
Glass Lewis noted that the 20% hike was far above the average 5% salary rise granted to staff for 2023.
“Glass Lewis views high, fixed pay rises with scepticism, as such remuneration is not directly linked to performance and may serve as a crutch when performance has fallen below expectations,” Glass Lewis said in its report, adding that large increases in base salaries can have a “compounding effect” on executive pay, since bonuses are often granted as a percentage of base salaries.
The proxy firm also raised concerns about the pay offered to Metro Bank’s new chief financial officer, Hopkinson, who joined in September on a £500,000 base salary that was nearly 24% higher than his predecessor’s.
Metro Bank defended the decision, saying demand for chief financial officers with turnaround experience was high, and that Hopkinson had a strong record, having previously worked at lenders including Standard Chartered.
Glass Lewis said it recognised Hopkinson’s experience, but said Metro Bank had failed to provide a “thorough and convincing explanation” for hiking pay at the time of joining, rather than throughout his term and based on performance.
“We would generally expect to see incoming executives appointed at a discount relative to their predecessors, with any significant salary increases occurring on a phased basis, concomitant with experience in the role and at the company,” Glass Lewis said.
Metro Bank said: “Both awards are consistent with the remuneration policy approved by shareholders.”
Barclays is also at risk of a shareholder backlash over long-term bonuses for its former chief financial officer Tushar Mozaria, who was in charge when the bank mistakenly sold billions of pounds of US securities that it was not authorised to sell, resulting in a US fine.
While Barclays docked his pay, Glass Lewis said it did not go far enough. “We believe shareholders could reasonably have expected the committee to further reduce this award to better reflect the financial and reputational impact of the risk and control issues over the period,” Glass Lewis wrote.
