Barclays 2003 Annual Report Download - page 26

Corporate Governance
Barclays Report on Remuneration
24
Barclays reward programmes are designed to support and facilitate
generation of TSR. The graph below shows the TSR for the FTSE 100
Index and Barclays since 31st December 1998. The FTSE 100 is the index
of the hundred largest UK quoted companies by market capitalisation. It
is a widely recognised performance comparison for large UK companies.
It shows that, by the end of 2003, a hypothetical £100 invested in
Barclays on 31st December 1998 would have generated a total return
of £82, compared with a loss of £13 if invested in the FTSE 100 Index.
Barclays therefore significantly outperformed the FTSE 100 for
this period.
Total Shareholder Return
Note
The Directors’ Remuneration Report Regulations require that the graph shows TSR
for the five years ending with the relevant financial year.
The Reward Package for Executive Directors
The reward package for the executive Directors and other senior
executives comprises:
• base salary;
• annual bonus including the Executive Share Award Scheme (ESAS);
• the Incentive Share Option Plan (ISOP); and
• pension and other benefits.
The Committee reviews the elements of the reward package relative to
the practice of other comparable organisations.
The sections that follow explain how each of the elements of
remuneration listed above is structured. Each part of the package
is important and has a specific role in achieving the aims of the
remuneration policy. The combined potential earnings from bonus and
ISOP outweigh the other elements, and are subject to performance
conditions, thereby placing a large proportion of total reward at risk. The
component parts for each Director are detailed in tables accompanying
this Report.
Base Salary
This is a fixed cash sum, payable monthly. The Committee reviews
salaries each year as part of the total reward package, recognising
market levels and individual contribution.
Annual Bonus Including Executive Share Award Scheme (ESAS)
The annual bonus for executive Directors is linked to Group economic
profit performance and individual performance. Cash bonuses for
executive Directors who were on the Board during 2003 were 174% of
base salary at 31st December 2003 for the Group Chief Executive, and
between 90% and 103% of base salary for the other executive Directors.
Up to 75% of any bonus award is normally paid as cash and the balance
as a mandatory award of shares under ESAS (see page 30 for details),
which must be held for at least three years.
0
50
1998 1999 2000Value(£)
100
150
Barclays PLC
FTSE 100 Index
200
141.10
169.60
191.35
134.09
182.13
2001 2002 2003
100 120.59 110.6 6
95.07
73.99 87.23
Incentive Share Option Plan (ISOP)
The ISOP is designed to provide the opportunity for individuals to
receive rewards for creating sustained shareholder value growth.
Participants are granted options over Barclays PLC ordinary shares,
which are normally exercisable after three years at the market price
at the time of grant. The number of shares over which options can be
exercised depends upon Barclays performance against specific targets.
In establishing the performance targets, the Committee has sought
to encourage excellent business performance. The two measures of
performance used for the 2003 grant were EP growth and relative
TSR. These are both good measures of the value created for
shareholders. EP is used as a key internal value creation metric.
The Committee agrees a level of ISOP award for each executive Director
taking account of market practice for comparable positions and
performance. For the 2003 ISOP grant, a proportion of the award for
executive Directors was subject to the EP measure and a proportion
to the TSR measure.
1. Growth in Economic Profit
This measure encourages both profitable growth and the efficient use
of capital.
If cumulative EP is above the target range at the end of the three-year
performance period, options over double the number of target award
shares will become exercisable. If cumulative EP is below the target
range at the end of the three-year performance period, options over half
of the target award shares will become exercisable. Where EP is below
the three-year cumulative EP for the previous three years, the options
lapse. This is described, for the 2003 awards, in the following table.
EP ranges for 2003 grant of ISOP for performance period 2003
to 2005(a)
Number of shares
under option that
Performance Achieved become exercisable
Above the ‘Target’ range (i.e. the 3-year
cumulative EP for the performance period
is above £5,200m) 2 x Target Award
In the ‘Target’ range (i.e. the 3-year
cumulative EP for the performance period
is between £3,900m and £5,200m) 1 x Target Award
Below the ‘Target’ range (i.e. the 3-year
cumulative EP for the performance period
is below £3,900m) 0.5 x Target Award
EP growth is not positive (i.e. the 3-year
cumulative EP for the performance period
is not more than the cumulative EP for the
previous 3-year period) Zero
Note
(a) EP for 2003, the first year of the 3-year performance period was £1,420m.
For the 2000 grant of ISOP, which vested during 2003, the outcome of
the EP performance condition was above target, which provided a
vesting of 2 x target award.