Barclays 2009 Annual Report Download - page 175

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 173
iv) Pioneering
– Driving new ideas, especially those that make Barclays profitable
and improve control.
– Improving operational excellence.
– Adding diverse skills to stimulate new perspectives and bold steps.
v) Trusted
– Acting with the highest levels of integrity to retain the trust
of customers, shareholders, other external stakeholders and
colleagues.
– Taking full responsibility for decisions and actions.
– Reflecting the operation of independent, robust and evidence based
governance and control and complying with relevant legal and
regulatory requirements.
The Committee keeps the Remuneration Policy and arrangements, as
detailed in this report, under review to ensure that Barclays programmes
remain competitive and provide appropriate incentive for performance.
Remuneration decisions
Our Remuneration Policy provides a framework for the Committee in
carrying out its work including remuneration decisions in relation to
executive Directors.
One of the core elements of Barclays approach is to deliver
compensation that is affordable and appropriate in terms of value allocated
to shareholders and employees, with full consideration also being given
to other relevant stakeholders such as customers, regulators and
governments. When making compensation decisions, Barclays balances
the views of these stakeholders with the need to be able to attract, retain
and incentivise talent in a competitive market.
A particular focus during 2009 has been to ensure that our approach to
discretionary pay awards for 2009 is compliant with both the Financial
Services Authority Remuneration Code and the Financial Stability Board
Implementation Standards, and that aggregate funding decisions balance a
number of factors including the need to continue to strengthen capital
ratios, to invest in the business, to recommence dividend payments and to
protect the business franchise.
We are committed to the principle of pay for performance. A key
element of ensuring the link between pay and performance on an individual
basis is the robust performance assessment framework operated across the
Group. Employee behaviours are considered in the context of the Guiding
Principles set out above which are incorporated into our Remuneration
Policy. The extent to which employee behaviour accords with these
standards is assessed as part of the performance assessment framework,
which includes an examination of the employee’s performance from both a
financial and non-financial perspective. Performance against these areas
helps to reinforce the right behaviours and so mitigate operational and
reputational risks. The resulting performance ratings have a direct impact on
all individual compensation decisions.
At an aggregate level, in order to ensure that a link is maintained
between pay and performance, incentive funding decisions are made by
reference to a number of quantitative and qualitative measures and are
determined at the discretion of the Committee. During 2009, the role of Risk
and other control functions in remuneration governance was enhanced and
the process for setting the remuneration of control functions was
formalised.
The exercise of informed discretion plays an important role in the
assessment of performance in the context of all our remuneration decisions,
rather than using a formulaic approach which could incentivise
inappropriate behaviours.
Pay and employment conditions elsewhere in the Group are taken into
account by the Committee in determining the remuneration packages for
executive Directors. The general approach is the same across the Group,
namely decisions are made on a total compensation basis (base salary,
bonus and long-term awards) against the relevant market. We seek to
provide market competitive retirement and other benefits and eligible
employees have the opportunity to participate in share plans.
Remuneration Policy governance
To ensure appropriate operation of the Remuneration Policy, the Committee
has established frameworks for the governance of remuneration in each of
the major businesses and for the Group as a whole. These frameworks were
reviewed in 2009.The current frameworks set out key financial ratios
achieved by Barclays and its competitors and have been used by the
Committee to inform its decision-making process when approving
aggregate remuneration spend, including bonus and long-term incentive
expenditure, strategic investment for new hires, and the remuneration
arrangements of any employee with annual total remuneration equal to or
in excess of £750,000. Going forward, compensation of employees within
the scope of the FSA Remuneration Code’s particular remuneration
structure requirements will also be individually approved by the Committee.
The reporting of senior hires and leavers to the Committee has also been
enhanced.
For individual remuneration decisions made by the Committee,
including those for executive Directors and other key senior management,
the Committee reviews each element of remuneration relative to
performance and to the practice of other comparable organisations.
Remuneration is benchmarked against the markets in which we compete for
talent. This includes benchmarking against other leading international
banks and financial services organisations, and other companies of a similar
size to Barclays in the FTSE 100 Index.
Given the materiality of Barclays pension arrangements, the Committee
operates a specific framework for the management of pensions to ensure
proper oversight. The Global Retirement Fund Governance Framework is
operated to ensure best practice in respect of regulatory compliance,
governance, investment and administration. In the second half of 2009,
Barclays announced the closure of its UK final salary pension schemes to
future accrual in order to reduce current and future UK pension liability risk
and to ensure that our pension arrangements are sustainable and affordable
over the long term. Details of the pension arrangements in place for
executive Directors are set out on page 178 and for other employees on
page 236.