Investors led by Standard Life Investments (SLI) gave banking group Barclays a bloody nose by voting against its controversial bonus policy on Thursday.
Shareholders at the bank's annual meeting in London cast 23.99% of votes against its remuneration report in protest at its decision to increase bonuses by £200m to £2.4bn last year.
Some 76.01 of votes cast were in favour, but shareholders withheld more than 1.4bn votes. Votes cast represented 57.19% of Barclays' issued share capital.
Alison Kennedy, governance & stewardship director at SLI, told Chairman David Walker, Chief Executive Antony Jenkins (pictured) and the rest of the board that the institution planned to vote against the group's remuneration report.
She said: "We appreciate there were competitive pressures in 2013 but we're not convinced that the 2013 bonus pool was in the best interests of shareholders."
She said SLI was concerned particularly because the bonuses came despite Barclays leaving its dividend unchanged and raising £5.8bn in a rights issue.
"We also believe this has had implications for the bank's reputation," she said.
Another investor told the board: "I think the remuneration committee should be sacked."
A representative of German investors holding 995,000 shares
in Barclays said they would also vote against the remuneration report due to opposition to Jenkins's remuneration.
The representative said the bank's share price was now lower than the price applied to its last-but-one rights issue.
Colchester United, not Manchester United
Another shareholder told the meeting that the bank's £5.8bn rights issue was an "atrocity" and said £3bn of impairments taken by Barclays had been four times the level of dividend payments.
He also protested against the news that Barclays paid 481 of its staff £1m or more last year - 53 more than during the year before.
"We're paying for Manchester United but we're getting Colchester United," he said.
"I would urge you to exhibit leadership on pay restraint. Halve what the 481 are getting and increase our dividend by 50%."
The board defended the bonus decision, saying Barclays had faced an exodus of staff and needed to pay market rates to protect shareholders' interests.
Remuneration Committee Chairman John Sunderland told the meeting that the bank had reduced the incentive in its bonus pool by 48%, which had resulted in a doubling of the number of people leaving its investment bank.
"The easy option would have been to have made a non-controversial decision about the bonus pool. That meant we would not have been criticised but there would have been a further exodus of people," he said.
Walker admitted that the last five years had not been an easy time to be a shareholder in Barclays, which has been embroiled in Libor rate-rigging allegations and other controversies.
He said the bank believed there should be a re-balancing of priorities in favour of shareholders rather than the bank's management.
Walker said the bonus pool of the investment bank had fallen by almost half from 2010 levels in 2011 and 2012.
He added: "But we were faced last year with a situation in which we were losing people crucial to the future of the investment bank in an extremely competitive environment in which total pay in some parts of the major US investment banks rose by 15% or more.
"We saw significantly higher numbers of high quality people we wanted to recruit turning down our offers. In this situation, where there is a genuine threat to the health of the franchise, our duty of care is to protect value for shareholders. The challenge was the need for damage limitation and franchise protection."
Barclays is preparing to announce a strategy review next month which some have speculated could include 7,500 job losses in its investment bank.
Jenkins declined to give advance details of the review, but said: "The future of Barclays will be as a strong focused international bank and the investment bank will be an important part of that."
Barclays said in a statement accompanying the meeting that there was likely to be a small fall in adjusted pre-tax profit in the first quarter, although cost cuts would help to offset a weak investment banking performance.
Shares in Barclays rose 3p or 1.2% to 251.9p at 16:34 in London.