Santander UK unable to get back bonuses
LLOYDS has announced plans to punish its former management for losses incurred due to a customer mis-selling scandal – but its current executives have escaped a similar penalty for their role in the same scandal at Santander UK.
Santander UK, the former home of many of Lloyds’ current top executives, has found itself unable to punish the management that presided over mis-selling insurance because they gave up their long-term bonus when they left to join taxpayer-owned Lloyds. They instead received “golden hello” awards worth the same amount.
City A.M. understands that Santander has sought legal advice on whether and how it can reflect the £538m hit it took compensating customers who were mis-sold payment protection insurance (PPI) by slashing pay-outs for the managers in charge at the time.
But because the relevant execs – António Horta-Osório, Antonio Lorenzo, Juan Colombás, and Alison Brittain – gave up their long-term incentive-based bonus when they quit Santander UK for Lloyds, the bank has nothing to reclaim.
All three received “golden hello” share awards to compensate for the loss of their long-term bonus when they joined the semi-nationalised Lloyds.
But they were not compensated for the loss of their pension pots, which in the case of Lloyds chief executive Horta-Osório, was worth more than the “golden hello”. A spokesman for Lloyds said: “It is worth remembering that António gave up very significant future earnings when he left Santander to join Lloyds.”
The banks’ former executives, however, are likely to be unimpressed by the slashes to their long-term bonus awards while their successors’ remain in tact.
Former chief executive Eric Daniels bore the brunt of the punishment: 40 per cent of his long-term bonus was cut, equal to £580,000. Four other directors are to lose a quarter of their long-term share bonus and eight more will see five per cent sliced off.
They are being punished for running the bank when it mis-sold PPI to thousands of consumers and then appealing against a high court ruling on the matter, resulting in a total cost of £3.2bn to Lloyds, which is expected to wipe out its 2011 profits.
The bank said the decision by the board is “based on the fact that had the outcome of [PPI scandal] been known… individual bonus awards would also have been lower.”
The FSA is forcing banks to cancel chunks of bonus awards that have not yet paid out – known as a “clawback” – as a punishment for the PPI scandal.