Barclays 2006 Annual Report Download - page 132

Barclays PLC
Annual Report 2006
128
Changes to Chairman and executive Directors
Matthew Barrett retired as Chairman on 31st December 2006.
Matthew Barrett was succeeded by Marcus Agius, who was appointed
as a non-executive Director with effect from 1st September 2006 and
Chairman with effect from 1st January 2007.
As a non-executive Director, Marcus Agius received an annual fee of
£65,000 (pro rata) with effect from 1st September 2006. From
1st January 2007, on becoming Chairman, Marcus Agius receives a fee
of £750,000 (inclusive of director’s fees). He is also eligible for private
health insurance. The minimum time commitment is equivalent to 60%
of a full time role. Marcus Agius is not eligible to participate in Barclays
bonus and share incentive plans, nor will he participate in Barclays
pension plans or receive any pension contributions. The service contract
provides for a notice period of 12 months from the Group or six months
from Marcus Agius.
Frits Seegers was appointed as an executive Director with effect from
10th July 2006. The key terms of the executive Directors’ service
contracts are set out on pages 130 and 131.
David Roberts ceased to be an executive Director on 31st December
2006. Payments to David Roberts in respect of the termination of his
service contract are shown in note (i) on page 133.
Naguib Kheraj will cease to be an executive Director on 31st March
2007. Naguib Kheraj will be succeeded by Chris Lucas, who has been
appointed to the position of Group Finance Director with effect from
1st April 2007.
From 1st April 2007, on becoming an executive Director, Chris Lucas’
base salary will be £600,000 per annum. The Committee will, in line with
usual practice, determine the size of any annual performance bonus,
dependent on both business and individual performance. For 2007, a
guaranteed performance bonus has been agreed, comprising a cash
bonus of £450,000 and a recommended ESAS award over shares with
a value of £150,000, in total £600,000. This will be recommended in
March 2008. The Committee will, in line with usual practice, determine
the size of awards of performance shares to be made each year under
PSP. The 2007 PSP award will be recommended to be made as soon as
practicable after Chris Lucas’ start date for an initial allocation of
£600,000. In addition, an ESAS award over shares with a value of
£500,000 will be recommended as soon as practicable after Chris
Lucas’ start date. This ESAS award would normally vest 50% after one
year and the remainder after two years (bonus shares are not applicable
to this award). This award is in recognition of forfeited remuneration.
Chris Lucas will be eligible to participate in the following benefits: life
cover, use of company car or cash equivalent, medical insurance and
the ill-health income plan. In addition, Chris Lucas will receive a cash
allowance of 25% of his annual base salary in lieu of pension
contributions.
The service contract provides for a notice period of 12 months from the
Group or six months from Chris Lucas. On termination, the service
contract provides for a pro-rated phased payment of his notice
entitlement and Chris Lucas has an explicit duty to mitigate his loss.
Base Salary
The annual base salaries for the current executive Directors are shown
in the table below:
Date of
As at As at previous
31st Dec 2006 1st April 2007 increase
John Varley £900,000 £1,000,000 1st Apr 2006
Robert E Diamond Jr £250,000 £250,000 1st Mar 1999
Gary Hoffman £625,000 £625,000 1st Apr 2006
Naguib Kheraj £700,000 £700,000 1st Apr 2006
Frits Seegers £700,000 £700,000 n/a
In respect of John Varley, having regard to levels of salary and total
compensation in comparable organisations, the Committee approved
an increase to his base salary effective 1st April 2007.
Annual Bonus and ESAS
75% of the annual bonus is delivered as cash. The remaining 25% is
recommended as a provisional allocation of shares under ESAS. The
maximum bonus opportunity is tailored to the relevant market; this is
typically 250% of base salary.
The annual bonus is based on a qualitative and quantitative assessment
of performance (including EP and PBT results) with the quantitative
assessment comprising the majority. EP and PBT are considered to be
good measures of value creation to shareholders.
ESAS is a deferred share award plan in which awards are initially granted
in the form of a provisional allocation that does not give rise to any
entitlement to the shares. The value of mandatory bonus deferrals
under ESAS is subject to the same Group and individual performance
criteria as the annual cash bonus. A mandatory ESAS award comprises
shares with a value of 25% of the annual bonus plus an additional
element for bonus shares which is approximately equal to 30% of the
25% of the bonus that has been deferred. Normally, the trustees of ESAS
will permit the executive to call for the shares from the end of the third
year from grant of an award by granting a right to acquire shares (a nil
cost option) exercisable for two years. As this nil cost option is part of
the structure of an ESAS award and as ESAS is a deferred share award
plan, it would not be appropriate to attach a performance condition to
the exercise of these options. If the right is not exercised, the trustees of
ESAS will normally, at the end of the fifth year, release all of the shares,
including bonus shares equal to 30% of the basic award. If the right is
exercised, an executive may lose the opportunity of receiving one-third
of the bonus shares. If an executive ceases to be employed he may
forfeit his award depending on why he leaves. An award under ESAS
may be forfeited if the executive resigns and commences employment
with a competitor business.
In addition, eligible executives may request that all or part of the cash
bonus to which they would otherwise become entitled be granted as
an additional award under ESAS called Voluntary ESAS. An award under
Voluntary ESAS will be granted as a right to acquire shares which will
become fully exercisable after five years. The number of shares under
any award will reflect the value of the amount waived together with a
number of bonus shares representing 30% of the amount waived.
PSP
PSP was approved by shareholders at the 2005 AGM. PSP replaced the
Incentive Share Option Plan (ISOP) in 2005 as the principal long-term
incentive plan. Performance shares are an award of ‘free’ Barclays shares
in the form of a provisional allocation for which no exercise price is
payable and which qualify for dividend shares. Performance share
awards are communicated to participants as an initial allocation. This
initial allocation is the ‘expected value’ of the award and is up to the
higher of 150% of base salary or 75% of base salary and target annual
bonus. Barclays performance over a three-year period determines the
final number of shares that may be released to participants. After three
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