Barclays 2012 Annual Report Download - page 36

Summary remuneration report continued
Compensation ratio trends and benchmark against peers
The reduction in compensation in 2012 moves Barclays from being at
the median pay-performance level compared to competitors over the
last two years to below the lower quartile level. This is a major shift
which the Committee recognised would require strong management
to achieve in a single year. Although it exposes the Group to some
retention risk, the Committee determined that it was a necessary
step on the multi-year journey to reposition Barclays remuneration.
Major shareholders and their representative bodies were consulted
as part of the process for deciding to take this change of approach.
Antony Jenkins said in the 2012 Results Announcement on 12 February
2013:
“We committed last year to a journey to bring down our compensation
ratio and have made good progress this year, with the Group
compensation to net income ratio declining to 38% (2011: 42%).
While this is progress, not the destination, we believe a ratio in the
mid-30s is a sustainable position in the medium term which will ensure
that we can continue to pay our people competitively for performance
while also enabling us to deliver a greater share of the income we
generate to shareholders.”
2012 incentives
We recognise the importance that our stakeholders attach to the
judgements that we apply in managing remuneration. Reduced
remuneration costs, and increasingly robust risk-adjustments and
performance conditions will continue to be a focus in how we achieve
the right balance between the priorities of our various stakeholders.
Remuneration must be managed in a way which incentivises
employees, ensures pay is linked to performance and is appropriately
aligned to risk. Material progress has been made in reducing absolute
levels of remuneration. In summary:
 Total Group incentive awards have been reduced by 16% since 2011,
with Group adjusted profit before tax increasing 26%.
 Incentive awards at the Investment Bank have been reduced by 20%
since 2011, with adjusted profit before tax increasing 37%.
 Group incentives have reduced by £1.3bn (38%) since 2010 with
adjusted profit before tax up 23% since 2010. In the Investment Bank
incentives have reduced by a similar amount, £1.3bn (48%), since
2010 with adjusted profit before tax down 7% since 2010.
 Incentive pools have been reduced while adjusted profits have
increased since 2011. This is because of actions taken by
management to reposition Barclays compensation in the market
place and to reflect significant risk events that impacted Barclays
in 2012. The significant risk events include the LIBOR investigation
and redress for PPI and interest rate hedging products.
 Compensation to adjusted net operating income is down to 38%
in 2012 (2011: 42%). Within aggregate compensation there has been
strong differentiation on the basis of individual performance to allow
us to manage compensation costs but also to pay competitively for
high performers.
 Average value of bonus per Group employee down 13% year on year
to £13,300; average value of bonus per Investment Bank employee
down 17% year on year to £54,100. Average value of bonus per
Group employee excluding the Investment Bank down 8% year on
year to £4,800.
 The proportion of the bonus pool that is deferred significantly
exceeds the FSA’s Remuneration Code requirements and is expected
to remain among the highest deferral levels globally.
Barclays total incentive awards granted
Barclays Group Investment Bank
Year ended
31.12.12
£m
Year ended
31.12.11
£m
%
Change
Year ended
31.12.12
£m
Year ended
31.12.11
£m
%
Change
Bonus pool 1,854 2,150 (14) 1,298 1,536 (15)
Other incentives 314 428 (27) 96 201 (52)
Total incentive awards granted 2,168 2,578 (16) 1,394 1,737 (20)
Adjusted profit before tax 7,048 5,590 26 4,063 2,965 37
Bonus pool as % of adjusted profit before tax
(pre bonus)a20% 29% 23% 35%
Proportion of bonus that is deferred 53% 58% 69% 75%
Total employees (full time equivalent) 139,200 141,100 (1) 24,000 23,600 2
Bonus per employee £13,300 £15,237 (13) £54,100 £65,085 (17)
Note
a Calculated as bonus awards divided by adjusted profit before tax excluding the income statement charge for bonus awards.
2010 2011 2012
55%
50%
45%
40%
35%
Barclays Group compensation as a percentage of adjusted net operating income
Peer group 75th percentile
Peer group median
Barclays Group
Peer group 25th percentile
44%
44% 44%
43%
42%
38%
49%
52%
48%
38% 39%
40%
Basis of calculation
The following peer group companies were used to
compare Barclays compensation ratio (where FY 2012
ratios were unavailable as at 28 February 2013, data for
Q3 2012 was used): BBVA, BNP Paribas, Bank of
America, Citigroup, Credit Suisse, Deutsche Bank, HSBC,
JP Morgan, Lloyds, Morgan Stanley, RBS, Santander,
Societe Generale, UBS and Unicredit. The impact of own
credit is excluded.
barclays.com/annualreport34 I Barclays PLC Annual Report 2012