FOI release

Letters to the Financial Services Secretary on Remuneration

Letters to the Financial Services Secretary on bonus payments and other aspects of remuneration at banks.

Documents

Aegon Asset Management

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Aviva investors

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Baille Gifford

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Blackrock

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F&C

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Fidelity

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Gartmore

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Goldman Sachs Asset Management

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Hendersons

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Hermes

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Insight

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Invesco Perpetual

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Investec Asset Management

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Jupiter Asset Management

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Lazard Asset Management

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Legal & General

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M&G

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Royal London Asset Management

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Scottish Widows Investment

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Standard Life Investments

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Threadneedle Asset Management

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USS

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Detail

Request

Copies of letters sent by institutional shareholders or their representative bodies to the Financial Services Secretary to the Treasury Lord Myners in response to his letter of 28th January 2010 on bonus payments and other aspects of remuneration at banks.

Disclosure

On the 28 January 2010 the Financial Services Secretary wrote to institutional shareholders and their representative bodies. The text of these letters is reproduced below:

I am writing to you in relation to the significant decisions that banks are currently making about bonus payments for 2009 performance.

In a year in which the major banks have benefited, both directly and indirectly, from taxpayer and central bank support, public attention will therefore focus on the decisions that boards make about bonuses.

Many banks have earned large profits this year from remarkably benign conditions, conditions created through the interventions by governments across the world.  These profits must surely be retained by shareholders in the business as capital to support the credit needs of customers and the economy.  Asymmetrical remuneration policies, tilted in favour of risk, might be good for traders.  But they are not good for customers, employees, creditors and owners of banks - or the taxpayer. 

Sir David Walker in his final report set out clearly the need for shareholders to engage more effectively with the companies which they own, and as a key part of that, for owners to exercise better oversight of remuneration policies and to retain “an appropriately informed capacity for influence on remuneration matters”.  This should not constitute micro management but represent an appropriately high-level view on what aspects of remuneration policy are consistent with firms’ sustainable long-term performance, sound capital management and the prevention of excessive risk taking. 

In my view, this would do a great deal to support the development of more sustainable remuneration policies and help rebuild public confidence in our investment institutions.  It is telling that institutions that have invested in baskets of bank shares have seen a net return over the last decade of near to zero; whilst over the same period the staff and executives of the same banks have enjoyed many tens of billions of pounds in rewards.  It is time to redress this balance.

In light of this I would be grateful if you could reply to me by 14 February detailing the actions your firm has taken, individually or collectively, to engage with the banks in relation to their bonus decisions.  Also how do you intend to appraise the decisions that remuneration committees ultimately make when voting on firms’ remuneration reports?

Yours sincerely,

PAUL MYNERS, FINANCIAL SERVICES SECRETARY TO THE TREASURY

One letter has been withheld under section 43(2) (commercial interests) and section 35(1)(a) (policy formulation) of the Act.