Lloyds Banking shows its claws
by Adam Jameson on February 22, 2012
The Lloyds Banking Group has the unique honor of being the first bank in Britain to clawback bonuses.
Bonus clawbacks are a recent development pushed by financial regulators to tie bonus payouts to long term business profits.
In the wake of the financial crisis there were numerous examples of executives receiving millions of dollars in bonuses which were based on phony, illusionary or fake profits.
For example, former Merrill Lynch CEO Stanley O’Neal steered the firm into the disastrous sub-prime business and presided over the Company as it lost $8 billion dollars. The firm imploded and lost its almost 100 years of independence in a fire-sale to the Bank of America. Nonetheless, Stan skipped happily away from the wreck with a golden parachute of $161.5 million.
With a clawback, Merrill would have been able to retrieve the money back from Mr. O’Neal so that he would not be able to profit from the disaster.
The Lloyds bonus clawback of $3.2 million centers on five executive directors, including a former chief executive, and eight other managers. Former CEO Eric Daniels would have to give up 40 percent of the bonus he was awarded for 2010.
The clawback is due to the ill-fated results of an insurance product that was sold to clients and later deemed inappropriate.
The “decision is based entirely on the principle of ‘accountability’ and in no way on culpability or wrongdoing by the individuals concerned,” Lloyds said. The bank also said the overall bonus pool for 2011 would be cut.
On a side note, would the clawback apply to regulators when they miss characters such as Bernie Madoff or politicians when their policies go horribly awry?
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