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Barclays is putting its entire board up for re-election at its next annual meeting and will pay no bonuses to any of its executive directors this year, in an attempt to quell a shareholder rebellion over the bank's recourse to the Middle East in a £7bn emergency fundraising.
The bank issued a statement this morning confirming that the board will offer themselves for re-election at its annual meeting in April next year. The offer amounts to a challenge to dissident shareholders to either offer their backing and quit complaining or to sack the board.
In its statement, Barclays said it had held a number of meetings with the bank's largest shareholders - that the discussions had been "constructive" and that it had "listened carefully to shareholders' views".
The bank also pledged to allow existing investors to participate further in the fundraising exercise, setting aside £500m for a placing.
The statement was issued amid growing pressure on John Varley, the Barclays chief executive, and his boardroom colleagues. Pirc, the body that advises pension funds and other major investors, is today urging shareholders to oppose the controversial capital raising at next week's extraordinary shareholder meeting. It wants shareholders to send directors a "clear unequivocal message" that the new investors from the Middle East are not a good solution to the need to raise funds.
The deal is already facing criticism from RREV, which also advises pension funds, and corporate governance advisory group RiskMetrics Group. The Barclays chairman, Marcus Agius, tried to convince major City investors of the merits of the fundraising at a meeting at the Association of British Insurers, which also has concerns about the fundraising, last week.
To avoid the government's £37bn bank bail-out, Barclays has devised a complex structure to raise over £5bn from investors in Abu Dhabi and Qatar - as part of a £7bn fundraising- that also involves issuing warrants and other financial instruments that are not being offered to existing shareholders. Major institutional investors are alarmed that they are being diluted as a result and their influence over the bank reduced.
Pirc acknowledged today that voting down the Barclays plan would force the bank to seek other ways to raise capital to bolster its balance sheet. However, it believes the bank should have considered this possibility when it decided on this form of fundraising.
Alan MacDougall, managing director of Pirc, said: "Shareholders have come in for criticism during the current crisis for failing to exercise their ownership responsibilities effectively. As as such it is important that institutional investors demonstrate that they take this role seriously and Pirc believes that simply assenting to a deal which many shareholders have problems with would not be the responsible thing to do in this instance."
MacDougall admitted he did not expect the deal to be voted down by shareholders. "However, we believe this case should provoke some reflection on whether some of the UK's largest investors are really acting as effective owners," said MacDougall.
Barclays has insisted that by raising cash from the Qatar Investment Authority and Sheikh Mansour bin Zayed al-Nahyan it can avoid the restrictions being imposed by the government on Lloyds TSB, Royal Bank of Scotland and HBOS which are taking the bail-out funds. But the restrictions, which initially banned dividends for five years and made demands on lending to small businesses and homeowners, are not as onerous as they first appeared. Lloyds, for instance, hopes to start paying dividends in 2009 while RBS also intends to pay dividends faster than five years.
The other main issue is over remuneration and the ban on bonuses this year for the banks taking taxpayer funds. Pirc said it had been a long-standing critic of pay practices at Barclays, particularly for Bob Diamond, the president of the bank and head of the investment banking arm Barclays Capital.
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