After a dramatic month at Barclays plc, the departure of non-executive director Alison Carnwath last week provided some insight into backroom board discussions at one of the world’s largest banks. Ms. Carnwath, who headed the remuneration committee, had pushed for no bonus to be paid to former CEO Bob Diamond in respect of 2011. So why was he in line for a £2.7 million payment?

The Financial Times reports that:
“…the majority of the committee was pursuaded by the arguments of [board chairman] Mr Agius, who also sat on the committee, that Mr. Diamond might leave the bank if he received no bonus. “Everyone bought the argument that Bob needed something for his ego,” said one person close to the situation.”

While the Barclays annual report notes that bonuses “are determined by reference to a qualitative and quantitative assessment of performance,” including profit before tax, performance against peers, strategic initiatives, cost reductions, leadership and return on equity as factors in determining bonus levels, ego was not discussed. The level of discretion afforded to the remuneration committee highlights the importance of tying awards to clearly disclosed results to ensure they reflect performance, rather than serving as a retentive or ego-soothing measure.

With shareholders being handed expanded powers (and responsibilities) under new binding remuneration votes, it’s worth noting that the UK government’s proposed shakeup of executive pay does not extend to the non-executive committees that ultimately determine award levels. However, investors are holding these directors accountable—the remuneration committee chairs at Aviva, Trinity Mirror and WPP, three of the companies that saw their remuneration reports rejected during the 2012 “shareholder spring,” received the support of just 78.8% of shareholders on average at their recent AGMs, well below the average 91.2% support received by the CEOs whose pay they set.