Barclays 2008 Annual Report Download - page 173

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Governance
Corporate governance
Remuneration Report
Barclays PLC Annual Report 2008 171
Future of Remuneration
The Committee commenced a review of remuneration during 2008. The
objective of the review was to assess how the pay for performance culture
and alignment with shareholders could be strengthened further. As the
review advanced it became clear that the mandate ought to be extended
to incorporate a broader industry wide review of remuneration. So far the
Committee has:
– revised the remuneration policy (see page 172) to accentuate risk
management and the role of behaviours in the determination of
remuneration
– increased the shareholding requirements for executive Directors
(from 1x to the higher of 2x times base salary or average total annual
cash compensation over the prior three years)
– announced a new plan in the first quarter of 2009 for approximately
15,000 employees to significantly increase the proportion of
remuneration paid over multiple years.
The review is continuing and will address detailed remuneration plans
and proposals which will be developed during 2009. The challenge for
the industry is to use this period to develop robust remuneration
structures that balance commercial enterprise with risk in the interests
of all stakeholders.
Barclays will be engaged in extensive dialogue and consultation with
shareholders in developing its new proposals. An update on progress will
be provided at the AGM.
Report
The following report of the Committee provides further explanation
of the current remuneration governance and arrangements for executive
Directors and is divided into the following sections:
– Committee remit, members and advisers
– Remuneration policy and governance
– Executive Directors’ remuneration
– Non-executive Directors’ remuneration
– Former Directors’ remuneration
– Share plan descriptions
The Committee unanimously recommends that you vote at the 2009
AGM to approve the Remuneration Report as all Directors will be doing
with their own Barclays shares.
On behalf of the Board
Sir Richard Broadbent
Chairman, Board HR and Remuneration Committee
5th March 2009
Statement from the Chairman of the Board HR and
Remuneration Committee
Context
The disruption in the capital markets that commenced in 2007 deepened
in 2008 resulting in one of the most challenging years ever for the global
financial services sector. As 2008 closed it was clear that the depth of the
financial crisis was so severe that a significant global economic downturn
was unavoidable. The extent to which remuneration structures may have
played a role in contributing to the financial crisis was still being debated
and under scrutiny as this statement was written. Whatever outcomes
prevail it is certain the remuneration structures will be different in
the future.
As a consequence of events, the Committee commenced its
deliberations for the 2008 performance year earlier than usual and met
more times than is typical. The agenda rapidly developed into two work
streams: first, the immediate decisions for 2008; and, second, the long-
term shape of remuneration. Work continues on the latter and will extend
into 2009. Our guiding principle throughout all decisions has been ‘pay
for performance’.
2008
The performance of Barclays during 2008 is described in detail in the
Group Chief Executive's business review on pages 12 to 13. Barclays
delivered profit of £6,077m, 14%lower than 2007. Although profitability,
on an absolute and relative basis, compares favourably across the sector,
several features of performance resulted in a more severe reduction in
variable remuneration:
1. The significant under performance of the share price and the
absolute reduction in market capitalisation (£20bn in 2008)
2. The decision not to pay a final dividend for 2008
3. The significantly lower absolute performance and weaker
earnings in Barclays Capital
The variable pay for the Group reduced 48%relative to 2007.
Accountability rests at the most senior levels and key factors relating
to executive Directors include:
– zero annual performance bonus for 2008
– no salary increases for 2009
– executive Directors who have long-term performance shares due to be
released in 2009 shall agree that these be deferred for a further two
years and subject to additional financial performance over that period.
– the total 2009 long-term awards are 64%lower than last year, with
no awards for the Chief Executive and President.
An assessment of Barclays remuneration structures and how well the
calibration had worked during this stressed period shows significant
alignment with shareholders:
– the existing long-term performance share plan award cycles
(2007/09 and 2008/10) are not expected to vest
– the cumulative effect of delivering significant proportions of
remuneration in Barclays shares (which are typically held on a long-
term basis) has resulted in the executive Directors’ share interests
decreasing in value by an aggregate of £63m in 2008, which when
added to the decrease of £32m in 2007 totals £95m for the two
year period
– the value of employee interests in shares under Barclays employee
share plans has decreased over 2007 and 2008 by approximately £2bn.