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LLOYDS BANKING GROUP is expected to stir up a fresh outcry over banking bonuses as it draws up plans for a multi-million pound incentive programme for its top managers.
The bonus plan is the first to be put in place since the banking giant was created from the merger of Lloyds TSB and HBOS and subsequently bailed out by the taxpayer.
Earlier this year the Lloyds board, led by chief executive Eric Daniels, who earned a basic salary of 1m last year, agreed to waive bonuses in the face of a public backlash.
Wolfgang Berndt, chairman of the remuneration committee, is working on the new scheme. He will benchmark Danielss bonus package against other bank bosses. This will include a comparison with Stephen Hester, who could earn 9.6m if he leads a turnround at the state-controlled Royal Bank of Scotland.
The executive remuneration review will be followed by an assessment of bonuses all the way down the company. Berndts proposal is expected to be put to shareholders for approval next January and February after the financial year-end but before the group posts its results. Details will be contained in the annual report. Lloyds said: We are currently in the early stages of this executive remuneration review.
Any decisions that are taken will be made within the context of last weeks announcement about executive remuneration from the Treasury, the recommendations of the Walker review and the FSA code on remuneration.
Lloyds priority remains to sort out its balance sheet. Daniels is likely to launch a 10 billion rights issue to lessen the banks reliance on the governments asset protection scheme, which could drive the taxpayers stake from 43% to 65%. At the same time, he is under pressure from Neelie Kroes, the EU competition commissioner, to carve up the group.
UK Financial Investments, which manages the governments bankstakes, is understood to have suggested to Sir Win Bischoff, Lloyds chairman, that he could reduce the size of the Lloyds board.
One plan would be for retail and wholesale executives Helen Weir and Truett Tate to step down. Tate may leave the company. It is understood that Gershon Cohen, head of Lloyds project finance team, is being groomed to succeed him.
Meanwhile, Lord Myners, the City minister, is expected to ask the top investment banks this week to sign up to the strictures on bonuses agreed at the recent G20 meeting. High street banks agreed to fall into line last week.