Barclays 2006 Annual Report Download - page 134

Barclays PLC
Annual Report 2006
130
To encourage employee ownership of Barclays shares, Barclays
matches, share for share, up to the first £600 each employee invests in
Sharepurchase in each tax year. Matching shares must normally be held
by the trustee on behalf of the participant for no less than three years.
At 31st December 2006, 19,619 employees were participants in
Sharepurchase, with a total of 9.7 million shares held on their behalf by
the Sharepurchase trustee.
Dilution Limits
The outstanding awards under ISOP and Sharesave are intended to be
satisfied by the issue of new Barclays shares or through treasury shares
within the limits agreed by shareholders when these plans were
approved. These limits comply with the Association of British Insurers’
guidelines restricting dilution from employee share plans. The overall
limits under the guidelines are that no more than 10% of a company’s
issued share capital may be used in any ten-year period. Up to 5% may
be used for executive share plans. Shares in Barclays Global Investors
UK Holdings Limited issued as a result of option exercises under the
BGI EOP also count towards these limits. As at 31st December 2006,
Barclays headroom under these limits, i.e. the amount remaining
available for issue, was 3.3% and 1.2% respectively.
Employees’ Benefit Trusts (EBTs)
The trustees of the Barclays EBTs grant awards under ESAS and PSP
over existing Barclays shares which they have purchased in the market.
The trustees of the Barclays EBTs have informed the Bank that their
normal policy is to abstain from voting in respect of the Barclays shares
held in trust.
Pensions
All Group pension arrangements are managed in accordance with
the Global Retirement Fund Governance Framework to ensure best
practice in respect of regulatory compliance, governance, investment
and administration. The framework is overseen by the Committee.
Pension benefits for executive Directors are provided through defined
benefit plans, defined contribution plans, unfunded unapproved
retirement benefit arrangements or a combination of these. The
pension benefit applicable will depend on the date an executive Director
was appointed and their individual situation. Annual performance
related bonuses are not included in pensionable salary.
The Group’s closed UK defined benefit pension arrangement, of which
John Varley, Gary Hoffman and David Roberts are members, is a non-
contributory scheme. Benefits are provided on leaving service at normal
pension age (60) by reference to the executive Director’s length of
service, normally by reference to 1/60th of pensionable salary for each
year of pensionable service (John Varley’s pension accrual is provided
through the scheme in accordance with his service contract as set out
in the notes to the pensions table on page 134).
The Group’s closed UK defined benefit pension arrangement also
provides that, in the event of death before retirement, a cash lump sum
of up to four times salary is paid together with a dependant’s pension
of 50% of the pension that would have been payable had the member
remained in active service until their normal pension age. For death in
retirement, a dependant’s pension is payable of approximately 50%
of the member’s pension at the date of death, not taking into account
commutation of any cash lump sum at the time of the member’s
retirement. If a member is granted a deferred pension that has not yet
come into payment, the widow/widower receives a pension of 50% of
the deferred pension payable. Where applicable, children’s pensions are
payable, usually up to the age of 18. Enhanced benefits may be payable
if it is determined that a member is unable to work as a result of serious
ill-health.
The Group’s US non-contributory defined benefit arrangement, of
which Robert E Diamond Jr is a member, provides a benefit at age 65
of 1/60th of final average pensionable pay plus 0.3% of final average
pensionable pay in excess of the US Internal Revenue Service’s covered
compensation limit for each year of pensionable service (up to a
maximum of 30 years). In line with current market practice, final
average pay in the US includes an element of bonus subject to overall
plan limits. In the event of a member’s death before retirement, a
spouse’s pension of approximately 50% of the member’s pension had
the member taken early retirement on the date of death, is payable.
On death after retirement, a spouse’s pension of 50% of the pension in
payment is payable. In addition, enhanced benefits are payable if the
member qualifies for disability benefits.
The US Restoration Plan, of which Robert E Diamond Jr is also a member,
is an unfunded unapproved arrangement which restores reductions in
the benefits provided through the approved US plan resulting from the
application of relevant compensation and benefit limitations under the
US Internal Revenue Code. Robert E Diamond Jr participates in this plan
on similar terms to other Barclays senior executives participating in US
benefit plans.
Robert E Diamond Jr also participates in the Barclays Bank PLC 401K
Thrift Savings Plan and Thrift Restoration Plan on similar terms to other
Barclays senior executives in the US.
Where appropriate, cash allowances are provided to executive Directors
in lieu of being able to join a Group pension arrangement. Both Naguib
Kheraj and Frits Seegers receive such cash allowances.
In the event that an executive Director builds up pension benefits close
to, or in excess of, the HMRC Lifetime Allowance, the executive Director
is eligible to opt for a cash allowance instead of continued pension
accrual. The allowance given is no more than the cost of funding the
existing pension benefit.
Service Contracts
The Group has service contracts with its Chairman and executive
Directors. The effective dates of the contracts for the Chairman and
executive Directors who served during 2006 are shown in the table
on page 131. The service contracts do not have a fixed term but provide
for a notice period from the Group of one year and normally
for retirement at age 65, except for David Roberts and Naguib Kheraj
who are leaving the Group. The Committee’s policy is that executive
Directors’ contracts should allow for termination with contractual
notice from the Group, except in circumstances of gross misconduct
when notice is not given.
The Committee’s approach when considering payments in the event
of termination is to take account of the individual circumstances
including the reason for termination, contractual obligations and share
and pension plan rules.
Payments in the event of termination are also subject to mitigation if
alternative employment is found during any period of pay in lieu of notice.
Corporate governance
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