Barclays 2004 Annual Report Download - page 31

Barclays PLC Annual Report 2004
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performance. For the 2000, 2001, 2002 and 2003 ISOP grants, the
performance metrics were TSR and EP growth. The measure of
performance used for the 2004 grant was TSR, which is a good
measure of the value created for shareholders. The awards are also
subject to an underlying financial health condition, that EP for the
relevant period is more than for the previous three-year period.
The Committee agrees a level of ISOP award for each executive
Director, taking account of market practice for comparable positions
and performance. The maximum annual target award under the ISOP
is 200% of remuneration; however, target awards granted to Directors
in 2004 were well below this level at 70% to 82% of base salary.
Mr Barrett did not receive a grant of ISOP in 2004, and will not be
eligible for awards of this kind as Chairman.
A proposed new long-term incentive plan has been submitted to
shareholders for approval at the AGM on 28th April 2005. Details of
the new Plan are included in the Notice of Meeting which has been
posted to shareholders with their Report. It can be accessed via the
Company’s website at www.investorrelations.barclays.co.uk. Awards
made in 2004 were made under the existing ISOP Plan.
ISOP Total Shareholder Return, Performance Condition
A proportion of the shares under option are subject to a challenging
performance condition based on TSR measured against a financial
services peer group approved by the Committee. This peer group
comprises eleven other leading UK and international financial
institutions that have been chosen to reflect Barclays business mix.
For the performance period 2004 to 2006, the peer group is ABN
Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC,
Lloyds TSB, Royal Bank of Scotland, JP Morgan Chase and UBS.
Performance achieved in the TSR Number of shares
ranking scale out of 12 financial under option that
institutions including Barclays become exercisable
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
If Barclays is ranked below sixth after three years, the performance condition
requires 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. For ISOP, TSR is calculated on a net dividend reinvestment
basis. The re-test provision will not be included in the new Performance Share
Plan for which we are seeking shareholder approval at the 2005 AGM in April.
Note
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 2001 grant of ISOP, which vested during 2004, Barclays relative
TSR performance ranking was fourth, which provided a vesting of 1x
target award. Therefore, 75% of the options granted under the TSR
condition, which 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 the 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 2004 grant, the discount was 20% of the market
value at the time the option was granted.
Sharepurchase (previously named Share Incentive Plan)
Sharepurchase 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 £1,500 worth of Barclays PLC ordinary
shares per tax year, 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.
Employee Benefits Trust (EBT)
The shares provided to employees in the ESAS are held in an EBT. The
trustees of the Barclays EBT have informed Barclays that their normal
policy is to abstain in any shareholder voting, in respect of the Barclays
shares held in trust.
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. Pensionable pay
comprises base salary only. Matthew W Barrett is not a member of the
Group’s main pension schemes. A notional fund has accrued on his
behalf outside the pension scheme (see page 32 for further details).
John Varley is a member of a closed non-contributory pension scheme
and his contract provides for a pension of 60% of pensionable salary
without reduction for early retirement if he retires at age 55 with 28
years of service and two-thirds of pensionable salary at age 60 with
33 years of service.
Service Contracts
The Group has service contracts with its Chairman, executive Directors
and senior executives. The effective dates of the contracts for the
Chairman and executive Directors who served during 2004 are shown
in the table on page 30. 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 60. 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
plan rules.