Barclays 2014 Annual Report Download - page 79

barclays.com/annualreport Barclays PLC Annual Report 2014 I 77
Governance: Remuneration report
The Committee remains focused on paying for
sustainable performance, aligning remuneration with risk
and delivering a greater proportion of the income we
generate to our shareholders.
Consistent with this, between 2010 and 2014 the
incentive pool has decreased by 47%.
Dear Shareholders
As Chairman of the Board Remuneration Committee, I am pleased to
introduce the Directors’ Remuneration Report for 2014.
We recognise that remuneration is an area of particular importance and
interest to shareholders and it is critical that we listen to and take into
account your views. Accordingly, my meetings with major investors
and shareholder representative groups have been helpful and
meaningful, contributing directly to the decisions made by the
Committee for 2014.
Performance and pay
An important principle which the Committee applies in its deliberations
is that while Barclays will not pay staff more than we judge to be
necessary, it is in shareholders’ interests that Barclays should pay for
performance. Front of mind is that we determine the correct level of
variable pay in a given year in order to maximise shareholder value over
the medium term.
In May 2014 the update to the Group Strategy resulted in the creation
of a Core business comprising four units: Personal and Corporate
Banking, Barclaycard, Africa Banking, and the Investment Bank. This
Core business represents the future of Barclays. Separately we
established Barclays Non-Core, with the intention of disposing of the
assets therein over time, assets which are no longer strategically
attractive to Barclays.
This restructuring has enabled Barclays to strengthen performance
across a range of metrics. The Group has delivered solid financial
performance with adjusted profit before tax up 12% to £5,502m for
2014. In achieving this there have been particularly good results in
Personal and Corporate Banking and Barclaycard. These results are
partly offset by a reduction in Investment Bank adjusted profit before
tax, as well as the impact of adverse currency movements in Africa
Banking. Sustained progress is being made and the balance now
present in the Group means that Barclays is a stronger business.
There has been considerable progress in strengthening the capital
position of the Group with Common Equity Tier 1 (CET1) ratio of
10.3% and a leverage ratio of 3.7% at the end of the year. Adjusted
operating expenses excluding costs to achieve Transform (ex CTA) are
down by £1.8bn year on year, in line with target. Barclays Non-Core
reduced Risk Weighted Assets by nearly a third, making substantial
progress towards the target, and materially reduced its drag on returns.
In formulating our 2014 decisions on variable pay the Committee ensured
that pay appropriately reflects financial performance delivered, both on
an adjusted and statutory basis, but also rebalanced returns back
towards shareholders. Performance against the commitments across
the 5Cs of the Balanced Scorecard was also an important consideration.
While the 2013 decisions on incentives reflected the high global
resignation rate for senior staff, the 2013 outcome helped to stabilise
the position. There continue to be some areas of concern but these are
more localised and had less bearing on 2014 pay decisions.
Consistent with that intent to rebalance returns, the incentive pool is
significantly lower overall for 2014, down by more than £0.5bn or 22%
in absolute terms at £1,860m compared to the incentive pool of
£2,378m for 2013, against a backdrop of an increase in adjusted profit
before tax year on year. The reduction in incentive pool is aligned to
the reduction in statutory profit before tax which incorporates all conduct
adjustments.
Part of the reduction in the incentive pool year on year is due to the
introduction of Role Based Pay (RBP) in 2014. Nevertheless, on a like for
like basis the incentive pool is down 11% on 2013. The introduction of
RBP in 2014 meant that an additional accounting charge of c£250m
was taken in the year, which would otherwise have been borne in
future years under our previous remuneration structures.
The Investment Bank incentive pool is down 24% in absolute terms.
This reduction is greater than the change in adjusted profit before tax
(ex CTA) which is down 21%. For the reasons set out above, the
introduction of RBP impacted profitability in the Investment Bank in
2014. Excluding the impact of RBP, Investment Bank adjusted profit
before tax (ex CTA) would have been down by 12%. On a like for like
basis, the Investment Bank front office incentive pool is down 12%.
Annual statement from the Chairman of the Board Remuneration Committee
Remuneration Committee members
Chairman
Sir John Sunderland
Members
Sir David Walker
Simon Fraser (until 24 April 2014)
Tim Breedon
Steve Thieke (from 6 February 2014)
Crawford Gillies (from 1 May 2014)
Contents Page
Annual statement 77
Performance, pay and distribution of earnings to
key stakeholders 79
Remuneration policy for all employees 80
2014 incentives 82
Annual report on Directors’ remuneration 86
Additional remuneration disclosures 99
Abridged Directors’ Remuneration Policy 102
The tables marked ‘audited’ in the report have been audited by PricewaterhouseCoopers LLP.
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