Barclays 2014 Annual Report Download - page 84

82 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Governance: Remuneration report
2014 pay and performance headlines
The key performance considerations which the Committee took into account in making its remuneration decisions for 2014 are highlighted below:
Q Adjusted profit before tax was up 12% to £5,502m (Adjusted profit before tax (ex CTA) was up 9% to £6,667m)
– Within the Core business, Personal and Corporate Banking and Barclaycard continued to grow profits (up 29% and 13% respectively), Africa
Banking has done well but was impacted by adverse currency movements, and the Investment Bank is making progress despite challenging
market conditions impacting income
Q Statutory profit before tax was down 21% at £2,256m (2013: £2,868m)
Q CRD IV Common Equity Tier 1 (CET1) ratio was up to 10.3% (2013: 9.1%)
Q The BCBS 270 leverage ratio was up to 3.7% (September 2014: 3.5%)
Q Balanced Scorecard – Steady progress has been made against the Balanced Scorecard in respect of 2018 targets. Full details of 2014
performance against the eight key measures within the Scorecard are set out on page 11.
The pay outcomes and decisions can be summarised as follows:
Q The Group compensation to adjusted net income ratio improved to 37.7% (2013: 38.7%). The Core compensation to adjusted net income ratio
was 35.7%
Q Total compensation costs decreased 8% to £8,891m (2013: £9,616m). Total compensation costs in the Investment Bank were down 9% at
£3,620m (2013: £3,978m)
Q Total incentive awards granted were £1,860m, down 22% on 2013. Investment Bank incentive awards granted were £1,053m, down 24%
on 2013
Q Although no resolutions have yet been reached with the relevant investigating authorities, the Committee has adopted a prudent approach in
relation to any potential settlements with respect to the ongoing Foreign Exchange trading investigations. The 2014 incentive pool, has as a
result, been adjusted downwards by the Committee. The Committee will, however, keep the matter under review
Q There has been strong differentiation on the basis of individual performance to allow the Group to more effectively manage compensation costs
Q Average value of incentive awards granted per Group employee is £14,100 (2013: £17,000) and the average value of incentive awards granted
per Investment Bank employee is £51,400 (2013: £61,000). Average value of incentive awards granted per Group employee excluding the
Investment Bank and Non-Core is £6,900 (2013: £7,600)
Q Levels of bonus deferral continue to significantly exceed the PRA Remuneration Code’s minimum requirements and are expected to remain
among the highest deferral levels globally. 2014 bonuses awarded to Managing Directors in the Investment Bank were 100% deferred.
2014 pay – Questions and answers
Why is a 2014 compensation to adjusted net income ratio of 37.7% appropriate for the Group?
The Committee continues to recognise the importance of rebalancing the allocation of income towards shareholders and the ongoing journey
towards achieving this remains a key focus.
The Group compensation to adjusted net income ratio has decreased significantly from 42.4% in 2010 to 37.7% in 2014, continuing the trajectory
towards a mid-30s ratio in the medium term.
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 the previous remuneration structures.
If RBP had not been introduced and an equivalent amount provided through bonus, this ratio would have been approximately 1% lower. The
impact is greatest within the Investment Bank (c.3%). Without this change, the compensation to adjusted net income ratio for the Investment
Bank would have been down year on year.
Within Barclays Core, the ratio is at 35.7% down from 36.2% and is therefore already tracking at the target level of mid-thirties, demonstrating the
efficiencies achieved in the Core business.
How do you justify a 2014 incentive pool of £1,860m?
The Committee remains focused on paying for performance while continuing to deliver a greater share of the income we generate to
shareholders.
The final 2014 incentive pool of £1,860m is down 22% on 2013. This is despite a 12% improvement in adjusted profit before tax, increases in CET1
and leverage ratios and steady progress towards our key measures under the Balanced Scorecard.
2014 incentives
This section provides details of how 2014 total incentive award decisions were made.