Barclays 2009 Annual Report Download - page 153

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 151
Corporate governance
Corporate governance report
Group Chairman’s Introduction
Barclays performed strongly in 2009, despite it being another challenging
year for the financial services industry. Once again, a number of difficult
decisions had to be taken as the Board sought to act in the best interests
of shareholders.
Review of 2009
The year started with confidence in the banking sector as a whole at an
extremely low ebb. The market was unsure as to the strength of banks’
balance sheets and the extent of further losses from both credit market
exposures and the global economic downturn. In Barclays case, the share
price was extremely weak during January and the Board took its first key
decision in deciding to issue an open letter from the Group Chief Executive
and myself on 26th January 2009 to address the principal causes for
concern. We felt that it was important to make this announcement, in what
were exceptional circumstances, to reassure our stakeholders that we were
well funded and profitable.
In March 2009, we announced that the Board did not believe it was in
the interests of investors, depositors or clients to participate in HM Treasury’s
Asset Protection Scheme. This decision was taken after careful consideration
of the economics of participation and detailed stress testing of our capital
position and resources, the results of which were confirmed by the FSA.
In March 2009, we explored the potential sale of our iShares business
with a number of interested parties and announced, in April 2009, the sale
of that business to a limited partnership established by CVC Capital Partners
Group. Following a superior offer from BlackRock, Inc. for the sale of the
whole of the Barclays Global Investors business (BGI), the Board concluded
that it would be in the best interests of Barclays and for the benefit of
shareholders to accept that offer. The resolution for the sale of BGI was put
to shareholders at a General Meeting on 6th August 2009 and 99.9% of
votes cast were in favour of the transaction.
During the second half of 2009, the Board took the decision to
restructure the Group’s credit market exposures. We announced in
September 2009 that we were restructuring a significant tranche of such
exposures in order to secure more stable risk-adjusted returns for
shareholders over time. And, while we did not pay a final dividend for 2008,
we were able to resume dividend payments in the second half of 2009 and
it is our intention to pay quarterly dividends going forward.
It was essential to keep the Board fully informed during the discussions
on all these matters and the Directors were updated regularly at Board
meetings and through ad hoc circulation of information. A significant
number of additional Board and Board Committee meetings were held,
often at short notice, to discuss and take those decisions – a total of
27 Board meetings were held during the year and each of our Board
Committees held additional meetings. It was also important to keep our
shareholders informed and, in addition to regulatory announcements,
meetings were held with our institutional shareholders and other investor
groups to discuss the financial crisis and how we have responded. Briefings
on these meetings were reported to the Board to ensure that all Directors
were aware of any concerns raised by our shareholders.
Corporate Governance in Barclays
As Chairman, a key part of my role is to ensure that the composition of the
Board is appropriate; that appropriate behaviours are demonstrated in the
Boardroom and that there is an environment in which challenge is expected
and achieved. In April, we reviewed the lessons learnt from the financial
crisis and considered any enhancements that could be made. Governance
processes were reviewed and a number of changes were made. These
included revisions to the Board Risk Committee Terms of Reference to
make explicit its role in reviewing risks following the Group’s entry into new
businesses or geographies. The changes also set out the Committee’s role
in reviewing the specific risk adjustments to be applied to performance
objectives. The frequency of risk, capital and liquidity reporting to the Board,
Board Audit Committee and Board Risk Committee has been increased and
additional time has been allocated to strategy discussions.
Barclays has emerged from the crisis in a relatively strong position
compared to many of our peers. The underlying profits of the Group were
strong in 2009 and good progress was made on key measures of financial
strength, such as capital and liquidity. However, we remain conscious of
the significant reduction in shareholder value suffered by our shareholders.
Whilst we have made changes to some of our Corporate Governance
processes and practices, we believe that these were fundamentally sound.
The review of Corporate Governance in the banking sector by Sir David
Walker (the Walker Review), to which we contributed, made a number of
recommendations for improvements in governance in the banking sector.
Many of the practices put forward in the Walker Review recommendations
are in line with practices we already have in place, but where we can
enhance processes and practices, we are doing so.
However, the real key to effective Corporate Governance is to ensure
that behaviours around the Board table are appropriate. It is an essential
part of my role to ensure that firstly, appropriate and timely information is
available to the Board in a readily understandable format, and secondly,
that there is an environment in the Boardroom which promotes and
supports constructive and effective challenge. This requires the right Board
composition and I believe Barclays has been well served by both its executive
and non-executive Directors in this respect. Our Directors understand
the importance of appropriate Board behaviour, which is set out in our
‘Charter of Expectations’ at www.barclays.com/corporategovernance.
The Charter of Expectations is given to all new Directors and reviewed on an
annual basis to ensure it sets out the expectations of each Director in their
role on the Board, including expected competencies, behaviours and time
commitment.
Board size and composition
During 2009, we made a conscious effort to reduce the size of the Board
from its peak of 17 and, although this number will fluctuate as we seek
to ensure the Board has the right level of skills and experience, we will aim
to keep it between 12 to 15 Directors. Going forward, it is our intention to
maintain a majority of independent non-executive Directors, with
approximately 50% of those non-executive Directors, including the Group
Chairman and the Chairmen of the principal Board Committees, having
banking or financial experience. We do believe, however, that to be fully
effective, the Board should have a balance of Directors with both banking
or financial experience and broader experience.
We have carefully considered, in the light of both the Walker Review and
the Review of the Combined Code, whether all Directors should stand for
re-election each year. I do believe it is important that the Chairman should
stand for re-election annually and, having discussed the issue at both the
Board Corporate Governance and Nominations Committee and the Board,
we decided that the Deputy Chairman and Committee Chairmen should
also stand for annual re-election.
The report that follows sets out how we have complied with the UK
Combined Code on Corporate Governance (the Code) and also gives further
details of any enhancements made during the year and in particular, in
response to the recommendations of the Walker Review.
Marcus Agius
Group Chairman
9th March 2010