Barclays 2012 Annual Report Download - page 75

Our remuneration report
We have sought to improve the transparency and clarity of
our remuneration disclosures. We have adopted in this report many
aspects of HM Government’s proposed regulations on directors’
remuneration reporting. We have done this a year before these are
expected to apply formally to Barclays.
We have made significant structural changes to this year’s report.
In outline, after the remuneration questions and answers the report
has the following sections:
 An explanation of our new remuneration policy for all Barclays
employees (pages 76-77);
 A detailed summary of how the 2012 incentives pool was
determined, including risk adjustments (pages 78-82);
 An explanation of our forward looking policy for Directors’
remuneration (pages 83-87);
 An explanation of how 2012 Director remuneration decisions were
implemented (pages 88-93); and
 Details of the Committee’s work in 2012 and other remuneration
information including statutory disclosures (pages 94-103).
The tables marked ‘audited’ in the report have been audited by Barclays
auditors, PricewaterhouseCoopers LLP.
Focus in 2013
The Committee’s focus in the coming months will be to continue the
process of repositioning remuneration at Barclays, and regaining
shareholder and public understanding and confidence. In future, as part of
the Transform Programme, individual performance will be assessed against
a balanced scorecard and performance will be measured against Barclays
values as well as other measures. The new performance assessment
process will be in place for all senior executives during 2013 and for all
other employees during 2014. Our new remuneration policy summarises
our objectives.
We will continue to challenge assertions about the levels of pay required
to attract, retain and motivate our people. We will not sanction paying
more than is necessary, and will take appropriate risk, supported by our
shareholders, in exerting further downward pressure on remuneration.
We committed last year to a journey to bring down our compensation
ratios and have made good progress this year, with the Group
compensation to adjusted net operating income ratio declining to 38%
(2011: 42%). We believe a ratio in the mid-30s is a sustainable position
in the medium term which will ensure that we can continue to pay our
people competitively for performance while also enabling us to deliver
a greater share of the income we generate to shareholders. We will be
informed in this work by a continuing constructive engagement and
dialogue with our shareholders and our other stakeholders.
I believe 2012 saw us move significantly forward in achieving the right
balance between the priorities of our various stakeholders. Reduced
remuneration costs, increasingly robust risk-adjustments to both the
incentives pool and individual incentive awards, tougher performance
conditions, new shareholding requirements, and improved
remuneration disclosures create a best practice framework which
we will continue to develop in the coming year and beyond.
On behalf of the Board
Sir John Sunderland
Chairman, Board Remuneration Committee
5 March 2013
Business context in 2012
Despite challenging economic conditions, 2012 saw Group adjusted
income increase by 2% and Group adjusted profit before tax increase
by 26% on 2011 levels. Adjusted return on average shareholders’ equity
increased to 7.8% (2011: 6.6%).
Despite this strong financial performance a number of significant risk
and compliance issues hit Barclays during the year. The LIBOR
investigation and other issues including PPI and interest rate hedging
products redress resulted in a loss of confidence in the bank, financial
penalties, and the resignations of both Marcus Agius and Bob Diamond
among other senior executives.
We have marked these failings by significant risk adjustments to the
2012 incentives pool and to individual remuneration decisions. We
made reductions of £860m to the 2012 incentives pool and a further
£300m has been clawed back from unvested deferred and long term
incentive awards. These decisions show our commitment to link pay to
performance and to align remuneration with risk. Performance should
be measured not just in financial terms but also in terms of behaviour,
sustainability, risk management and long term value creation.
Remuneration Committee work in 2012
A summary of the key subject areas covered at the Committee’s 2012
meetings can be found on page 95. We have reviewed and changed
our policies. We have carefully considered our total remuneration
spend, the structure of remuneration and individual decisions.
In addition to incentive awards and funding we have focused on
broader remuneration design, frameworks and policy, and regulatory
and risk issues.
We have reviewed and adopted a new remuneration policy. This reflects
the direction of Barclays more broadly under the Transform Programme
led by Antony Jenkins, and the adoption across the whole Group of a
new statement of Barclays Purpose and Values.
We have made significant reductions to our remuneration costs both
in absolute terms and relative to adjusted net operating income and
adjusted profit before tax. These are not one-off changes. They reflect
the Committee’s view that we are now on a multi-year path to
reposition Barclays remuneration.
Accordingly, we have reduced both the incentives pool and average
individual incentive awards across the Group. At a Group level 2012
total incentive awards are down 16% on 2011 levels. Within
the Investment Bank the reduction is 20%. As a result our
compensation ratios (i.e. the proportions of adjusted net operating
income and adjusted profit before tax used to pay all remuneration)
are now significantly lower, having moved from the market median to
the lower quartile within our industry. This is a significant repositioning
of our remuneration costs. Our intention is to continue to manage
down these ratios over time.
The average bonus across the Group in 2012 (excluding the Investment
Bank) has fallen by 8% to £4,800. In the Investment Bank the average
bonus in 2012 has fallen by 17% to £54,100. 45% of all Investment
Bank employees received no bonus for 2012.
Outside of our formal meetings, we have listened to shareholders’
concerns by meeting and engaging with them more frequently.
Our discussions have been frank and clear. We have been challenged
and assisted by the insight and recommendations this engagement
generates. Shareholders’ concerns that we have discussed include
senior executive remuneration levels, remuneration in the Investment
Bank in particular, and risk alignment in remuneration decisions.
Among the changes we have made reflecting shareholders’ views
are changes to the Barclays Long Term Incentive Plan. We have also
introduced a new shareholding requirement for executive Directors
and senior executives which is at the higher end of the market.
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