Barclays 2003 Annual Report Download - page 27

Barclays PLC Annual Report 2003 25
2. Total Shareholder Return
A proportion of the shares under option are subject to a separate
performance condition based on TSR measured against a financial
services peer group approved by the Committee. This peer group
comprises eleven other UK and international financial institutions that
have been chosen to reflect Barclays business mix. For the performance
period 2003 to 2005, the 2003 peer group is Abbey, ABN Amro, BBVA ,
BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, Lloyds TSB, Royal
Bank of Scotland and Standard Chartered.
If Barclays is ranked first, second or third in the peer group, then the
options will become exercisable over quadruple, triple or double the
target award shares, respectively. If Barclays is ranked fourth, fifth or
sixth in the peer group, the options will become exercisable over the
target award shares. However, if Barclays is ranked below sixth after
three years, there will be a re-test on the fourth anniversary, over the full
four-year period. If Barclays is not ranked sixth or higher after four years,
the options will lapse.
The method for measuring relative performance is shown in the table
that follows, together with the multiple of target award.
Performance achieved in the TSR Number of shares
ranking scale out of 12 financial under option that
institutions including Barclays become exercisable(a)
1st place 4 x Target Award
2nd place 3 x Target Award
3rd place 2 x Target Award
4th – 6th place 1 x Target Award
7th – 12th place Zero
Note
(a) Under the TSR condition, the ability to exercise is also subject to the condition
that EP for the three-year performance period is greater than the previous
performance period.
For the 2000 grant of ISOP which vested during 2003, Barclays relative
TSR performance ranking was third, which provided a vesting of 2 x
target award. Therefore, 50% of the options granted, that would have
vested had Barclays been ranked first, lapsed.
Options must normally be held for three years before they can be
exercised and lapse ten years after grant if not exercised.
Sharesave
All eligible employees including executive Directors have the opportunity
to participate in Barclays Sharesave Scheme. Sharesave is an Inland
Revenue approved all-employee share plan. The Inland Revenue does not
permit performance conditions to be attached to the exercise of options.
Under the plan, participants are granted options over Barclays PLC
ordinary shares. Each participant may save up to £250 per month to
purchase Barclays shares at a discount. For the 2003 grant, the discount
was 20% of the market value at the time the option was granted.
Share Incentive Plan
The Share Incentive Plan was introduced in January 2002. It is an Inland
Revenue approved all-employee share plan. The plan is open to all
eligible UK employees including executive Directors. Under the plan,
participants are able to purchase up to £125 worth of Barclays PLC
ordinary shares each month, which, if kept in trust for five years, can
be withdrawn from the plan tax-free. Any shares in the plan will earn
dividends in the form of additional shares, which must normally be
held by the trustee for three years before being eligible for release.
Pensions
A pension is payable on retirement at contractual retirement date
(normally 60), and is calculated either by reference to an executive
Director’s length of service and pensionable salary or to a money
purchase arrangement, depending upon date of hire. Matthew Barrett
is not a member of the Group’s main pension schemes. A notional fund
is accruing on his behalf outside the pension scheme (see page 28
for further details).
Service Contracts
The Group has service contracts with its Chairman, executive Directors
and senior executives1. The effective dates of the contracts for the
Chairman and executive Directors who served during 2003 are shown in
the table below. Non-executive Directors do not have service contracts.
The service contracts do not have a fixed term but provide for a notice
period from the Group of one year and normally for retirement at age
602. The Committee’s policy is that executive Directors’ contracts should
allow for termination with contractual notice from the Company, except
in circumstances of gross misconduct when notice is not given.
The Committee’s approach when considering payments in the event
of termination is to take account of the individual circumstances
including the reason for termination, contractual obligations and
share scheme rules.
Potential
Effective Normal compensation
date Notice retirement for loss
of contract period date of office
Sir Peter 1 year’s
Middleton31st May 1999 1 year n/a contractual
remuneration
MW Barrett 1st Jan 2002 1 year 19th Sep 2009 "
CJ Lendrum 15th Jun 1992 1 year 14th Jan 2007 "
JS Varley 1st Jan 2004 1 year 31st Mar 2016 "
In the Barclays report on remuneration for 2002, we reported that,
exceptionally, Mr Barrett’s contract provided for a pre-determined
payment of twice annual remuneration if his contract was terminated
following a change of control of Barclays. This provision will be
voluntarily removed from Mr Barrett’s contract with effect from
15th March 2004.
1Details of executive Directors standing for re-election at the 2004 AGM are set
out on page 17.
2Mr Barrett’s contract provides for normal retirement at age 65.
3Sir Peter Middleton’s service contract does not provide for a retirement date.