Barclays bank has caved to angry investors and changed its bonus structure for top executives, including CEO Bob Diamond, to better reflect the bank's performance.
Instead of receiving their full bonuses in shares over three years, Diamond and finance director Chris Lucas will now only receive half of the award each year until the bank meets performance targets - which it is currently failing.
The bank agreed to the change ahead of its shareholder meeting, it emerged on Thursday.
Diamond is currently scheduled to receive £900,000 from a total £2.7m bonus every year for three years - but now may receive only half that amount.
Lucas was expected to collect £600,000 per year, but will not receive it if the bank performs badly.
To receive their full bonus Barclays' return on equity must exceed the equity cost - a standard measure of a bank's success.
Unfortunately for Diamond and Lucas the cost currently stands at 11.5% and the return just 6.6% - meaning that the bank will have to improve significantly if their bonuses are to be paid in full.
Barclays said if that condition is not met, the potential pay-out will lapse if it is not met within three years from the date of the award.
The chief executive will also reportedly see the long-term incentive part of his pay package fall away, which may see his total package of salary, bonuses and tax benefits slide by 75% to no more than £5.5 million.
Aside from his bonus Diamond earned £1.35m in basic salary in 2011, as well as £2.25m in long-term incentive payments.
Barclays said it had been in talks with major shareholders since the remuneration details were published on 9 March.
The banking giant said Diamond and Lucas "volunteered" to subject their bonuses to new conditions in recognition of the "strength of opinion expressed by some shareholders".
The bank said: "Barclays is fully committed to ensuring that a greater proportion of income and profits flow to shareholders, notwithstanding that it operates within the constraints of a competitive market."
Barclays reiterated that it regards returns produced in 2011 as "unacceptable on an absolute basis".
The bank said it remains committed to delivering a 13% return on equity as soon as possible, although in February it admitted this would not happen in 2013 as previously hoped.
The shareholder rebellion over Barclays pay gathered pace earlier this month after leading investor group Pensions & Investment Research Consultants (Pirc) said Diamond should not receive "any bonus at all".
Pirc advised its members to vote against the bank's remuneration report, while Standard Life, Fidelity, Aviva and Scottish Widows, which account for 6.45% of the share register, are expected to do the same.
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