Lloyds claw back £2m in executive bonuses
Former chief executive Eric Daniels and 12 other senior members within the Lloyds banking group are to have their bonuses cut by £2 million.
Mr Daniels bonus was cut by 40% meaning he will lose £580,000 from his original £1.45m. A further four directors saw their bonuses sliced by £190,000 to "260,000. Whilst another eight executives had bonuses cut meaning they will receive approximately £100,000 less.
The reason stated for the claw back in bonuses is due to the banks mis-selling of payment protection insurance. Due to the mis-sold payment protection insurance Lloyds have been forced to put aside a staggering £3.2bn in order to cover compensation to its customers.
In a statement Lloyds said it was making an adjustment to a proportion of the bonus award for 2010, because if it had been aware of the mis-selling and the cost of putting it right, the bonus pool and awards from it would have been reduced.
The cuts in bonuses will be made with a reduction in the amounts previously awarded in deferred shares. This will also have an impact on bonuses for 2011 which will also be lower than projected.
This is a ground breaking move from Lloyds as this is the first time a UK bank has clawed back bonuses awarded to its executives as a result of a worse than expected financial performance.
This may not be the last claw back seen as the Financial Services Authority and politicians are applying pressure for some bonuses to be returned following the banking crisis of 2008.
Response to the News
As the first British bank who have experienced this unusual decision the response from the public has been supportive of the decision. People are questioning why bankers should receive such a large bonus for mis-selling. It's clear this puts out a strong message against practices such as mis-selling for the future.