Barclays 2003 Annual Report Download - page 21

2003 Corporate Governance Report
Chairman’s Statement
At Barclays, we are committed to having robust corporate governance
practices in place and applying the highest standards of business
integrity in all of our activities.
2003 has been another year in which corporate governance has been
the focal point of public and regulatory attention. In July we saw the
publication in the UK of the revised Combined Code on Corporate
Governance, the culmination of the various reviews that took place in
2002 and 2003, including the Higgs and Smith Reports. While Barclays will
only be required to report on compliance with the revised Combined Code
in respect of the 2004 financial year onwards, we are making every effort
to comply with it as quickly as possible.
Our commitment to complying with the revised Code was exemplified by
our approach to the communication of our succession plans in October
2003. The Chairman of the Board Remuneration Committee, Sir Nigel
Rudd, led the non-executive Directors in seeking my replacement as
Chairman. I am pleased we have found the right candidate in Matthew
Barrett.
I wrote to all shareholders on 6th November 2003 explaining why the
Board came to its decision to appoint Mr Barrett as Chairman. The
Board’s decision to appoint Mr Barrett followed an extensive and
rigorous process involving all the non-executive Directors. The process
involved establishing the desirable characteristics for a new Chairman
and reviewing external candidates, identified with the help of specialist
recruitment consultants, and their availability. Mr Barrett was the Board’s
unanimous choice. The Board does not regard his appointment as
setting a precedent in Barclays for appointing the Group Chief Executive
to the position of Chairman.
Mr Barrett’s appointment helps ensure stability within the senior
leadership team at a time of considerable change when a number of
senior managers have been given revised and broader responsibilities.
The Board also felt that Mr Barrett was the right person for the job given
the need to continue to implement our strategy, which has been shown
to be successful and value-creating for shareholders; Barclays financial
results in 2003 were very strong. The Board was also conscious that Mr
Barrett has only been with Barclays for four years and was keen to
ensure we obtained maximum value from his contribution, given the
success Barclays has enjoyed under his leadership.
The Board thus considered that this particular combination of
considerations at this particular time meant that Mr Barrett’s
appointment was in the best interests of shareholders.
The letter is reproduced in full below:
‘Dear Shareholder
Chairman of Barclays PLC
On 9th October 2003, Barclays announced a number of changes to the
Board and to senior management. The announcement said: ‘Sir Peter
Middleton, Chairman of the Board of Barclays PLC, will serve until
31st December 2004, at which time Matthew W. Barrett will succeed him.
Mr Barrett will be succeeded by John Varley as Group Chief Executive.’
The Combined Code on Corporate Governance
The new Combined Code on Corporate Governance will apply for
reporting years beginning on or after 1st November 2003. The Code will
require an explanation in cases where an individual who previously was
a Chief Executive Officer of a company is appointed Chairman of the
Board. In Barclays case, this will be included in the Report and Accounts
for 2003. However, I am writing to you today on behalf of the Board to
provide an early explanation of our decision.
Background
Mr Barrett has been Group Chief Executive of Barclays PLC for four years
having joined the Group in October 1999. During this time the strategy
that has been put in place has produced strong results. Barclays is in the
top quartile of its peers worldwide in terms of total shareholder return.
It has performed significantly better than the average of FTSE 100
companies. In terms of market capitalisation, it is now a top ten bank
globally. It has developed a powerful, cohesive management style and a
strong control culture. Senior leaders have developed to the point where
the Board had a wide choice of internal candidates to succeed Mr Barrett
as Group Chief Executive.
The announcements of the new Chairman and Group Chief Executive
were made well in advance so that the Group could ensure a smooth
transition to both roles and implement the new organisation structure
which was announced at the same time.
Process
The Board has conducted a thorough selection process. In the case of
the Chairman, both external and internal candidates were considered.
The Nominations Committee was, for this purpose, chaired by Sir Nigel
Rudd. However, all the non-executive Directors, and eventually the whole
Board, were involved.
Criteria
It is the obligation of the Board to appoint as Chairman the individual
who, in its opinion, is best qualified to serve shareholders. The Board
established a number of desirable characteristics to guide its search for
a new Chairman. These included:
(a) Strong commitment to the creation of shareholder value and high
standards of corporate governance.
(b) Experience of large multinational businesses.
(c) Ability to command the respect of Board members, shareholders,
employees and other key stakeholders.
(d) Understanding of the role of Chairman, including an ability to bring
a wider view to bear and work harmoniously with the new Group
Chief Executive.
(e) Knowledge of the global financial services industry.
It is the Board’s intention that the responsibilities of the Chairman and
Group Chief Executive will be agreed and set out in writing – as they are
currently for myself and Mr Barrett. They will be consistent with both
the existing roles and the best practice guidelines on the role of the
Chairman attached to the new Combined Code.
Reasons for the Board’s Decision
Mr Barrett emerged as the Board’s unanimous choice, ahead of all other
candidates, for the following reasons:
(a) Mr Barrett is an experienced international businessman. Prior to his
service with Barclays, he served 37 years with the Bank of Montreal.
He was Chief Executive Officer there for ten years. He has also served
as a non-executive Director on the Boards of multinational
companies, serving at various times as Chairman of Audit, Finance,
Remuneration and Corporate Governance Committees.
(b) Mr Barrett’s knowledge of the financial services industry is deep and
broad. He brings a wide experience and perspective yet, when he
retires as Group Chief Executive, he will have spent a relatively short
part of his career with Barclays. The Board feels that there is much to
be gained for the Group from his continued presence, as Chairman.
There is no reason to believe that his objectivity will be affected – as
it might have been had his whole career been with Barclays.
Corporate Governance
Corporate Governance Report
Barclays PLC Annual Report 2003 19