Barclays 2004 Annual Report Download - page 30

Corporate governance
Barclays report on remuneration
28
•to enable the Group to attract and retain people of proven ability,
experience and skills in the pools in which we compete for talent;
•to encourage behaviours which lead to excellence and appropriate
balance in: financial performance, governance and controls,
customer service, human resource management, brand and
reputation management, and risk management;
•to promote attention to maximising personal contribution,
contribution to the business in which the individuals work,
and contribution to the Group overall; and
•to ensure, both internally and externally, that remuneration policies
and programmes are transparent, well communicated, easily
understood and serve well the interests of shareholders.
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 1999. The FTSE 100 Index
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 2004, a hypothetical
£100 invested in Barclays on 31st December 1999 would have
generated a total return of £58, compared with a loss of nearly £20
if invested in the FTSE 100 Index. Barclays therefore significantly
outperformed the FTSE 100 Index for this period.
This graph shows the value, by 31st December 2004, of £100 invested in
Barclays on 31st December 1999 compared with the value of £100 invested
in the FTSE 100 Index. The other points plotted are the values at intervening
financial year-ends. TSR above is calculated on a net dividend reinvestment basis.
Note
The Directors’ Remuneration Report Regulations 2002 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 comprised:
•base salary;
•annual bonus including the Executive Share Award Scheme (ESAS);
•the Incentive Share Option Plan (ISOP); and
•pension and other benefits.
All the executive Directors met a Committee guideline that they
should hold the equivalent of 1x their base salary in Barclays shares,
including shares held on their behalf in ESAS.
The Committee reviews the elements of the reward package relative
to the practice of other comparable organisations. Reward is
benchmarked against the markets in which Barclays competes for talent.
20001999 2001 2002 2003 2004Value
(£)
0
FTSE
100 Index
Barclays
PLC
Total Shareholder Return
(Source: Thomson Financial)
200
100
100 91.77 78.84
61.36 72.34 80.47
120.19 135.61
95.03
129.07
158.42
150
100
50
This includes benchmarking against other leading international banks
and financial services organisations, and other companies of similar
size to Barclays in the FTSE 100 Index.
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.
The annual base salaries for the Chairman and the current executive
Directors are shown in the table below:
As at 1st Jan 2004 As at 1st Jan 2005
MW Barrett £1,100,000 £650,000
JS Varley(a) £700,000 £850,000
RJ Davis £500,000 £500,000
GA Hoffman £500,000 £500,000
N Kheraj £500,000 £500,000
DL Roberts £500,000 £500,000
Note
(a) John Varley’s base salary increased from £700,000 to £850,000 on
1st September 2004.
Annual Bonus Including Executive Share Award Scheme (ESAS)
The 2004 annual bonuses for executive Directors were linked to Group
EP performance and individual performance. Group EP was more than
30% above the level for 2003, which contributed to bonuses being paid
towards the top end of the range for 2004. For 2004, the maximum
bonus opportunity for outstanding performance was 187.5% of base
salary in cash and a further 62.5% in deferred shares. Cash bonuses for
current executive Directors for 2004 performance were 154% of base
salary as at 31st December 2004 for Mr Varley, and between 150%
and 187.5% of base salary for the other current Directors.
The shares element of the annual bonus referred to above must be
held for at least three years and is subject to potential forfeit if the
individual resigns and commences employment with a competitor
business.
Matthew W Barrett’s bonus for 2004 takes account of his former
role as Group Chief Executive up to and including 31st August 2004.
Mr Barrett is not eligible for a bonus for the performance year starting
1st January 2005.
Incentive Share Option Plan (ISOP)
The ISOP is designed to provide the opportunity for executive
Directors and senior managers 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