THE owner of Clydesdale Bank has been hit by a major revolt over how much it pays its top brass amid concern the remuneration of its chief executive could rise to more than £4 million this year.

A resolution seeking approval for the directors’ annual report on remuneration for 2018 was opposed by more than one-third (34.21 per cent) of votes cast, it emerged shortly after CYBG held its annual meeting in Melbourne.

It came after Institutional Shareholder Services (ISS), the influential advisory group, recommended investors oppose the pay report of the Glasgow-based institution, noting that the variable pay potential for executive directors will nearly double in 2019.

David Duffy, chief executive of CYBG, received remuneration totalling £1.83 million in the year ended September 30, which included an annual salary of £1m and bonus of £620,000.

However, his overall pay could rise to as much as £4m this year. That is based on the maximum amounts the former boss of Allied Irish Banks could earn under the bank’s bonus scheme and the value of awards made under its long-term incentive plan (LTIP).

Mr Duffy is due to receive a basic salary of £1.02m for 2019, two per cent higher than last year.

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In a report issued before the CYBG annual meeting in Australia, ISS declared that the bank had “not provided a compelling rationale for these increases”.

ISS noted comments made by the chairman of the audit committee, Adrian Grace, that the bank must focus on attracting, retaining and motivating key talent in light of factors such as Brexit uncertainty and CYBG’s £1.7 billion acquisition of Virgin Money, which completed in October. But ISS questioned whether the merger justified the increase in potential variable pay for senior leaders, stating that it will be some time before the success or failure of the deal becomes clear.

ISS said: “Although it is recognised that the acquisition of Virgin Money has significantly increased the size and operational scope of the company, the acquisition and the other market-related factors cited by the chair of the remuneration committee do not seem sufficient to justify such a substantial increase to variable remuneration.

“Moreover, it is unusual for UK companies to implement such a significant increase to variable pay without seeking shareholder approval for a new remuneration policy.”

The report noted: “Support for the remuneration report is not considered warranted due to significant increases to variable pay levels following the acquisition: the combined potential of bonus and LTIP will nearly double in FY2019.”

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According to CYBG’s 2018 annual report, Mr Duffy has the potential to earn a maximum of 118 per cent of his annual salary as a bonus, which is linked to the delivery of the 2019 business strategy. The bonus is due to be delivered in December, with 50 per cent paid in cash and the remainder in shares, the report notes.

The chief executive also has the potential to earn a maximum of 177% of his salary under the LTIP, with awards granted from December this year.

CYBG said in a statement after the annual meeting: “Our remuneration committee consulted with shareholders on our proposals for executive directors’ pay in advance of publishing this year’s remuneration report.

“While shareholders have approved our proposed approach to executive pay, we will continue to engage with them over the coming months to ensure their views are fully considered.

“Our proposed approach brings executive directors’ variable pay into line with comparable financial services firms [in the UK], and increases the amount of overall pay linked directly to the performance of the Bank and stretching long-term targets.”

The results of the AGM also disclosed that nearly six per cent of the voted shares went against the re-election of David Duffy as a director of the company, with an even higher percentage (7.82 per cent) going against the re-election of Mr Grace.

Shares in CYBG dipped slightly, closing down 1p at 183.9p. Its share price has fallen from 318.8p on January 30 last year.