Barclays 2012 Annual Report Download - page 80

2012 total incentive awards
This section provides details of how 2012 total incentive award decisions were made.
Business context and 2012 performance highlights
Despite the strong financial performance set out below a number of
significant risk and compliance issues hit Barclays during the year. The
LIBOR investigation and other events including PPI and interest rate
hedging products redress resulted in a loss of confidence in the Group,
financial penalties, and the resignations of Marcus Agius, Bob Diamond
and other senior executives. We have marked these failings by making
significant risk adjustments to the 2012 incentives pool and to
unvested deferred and long term incentive awards, and in the individual
remuneration decisions for 2012 for senior executives. Against this
challenging background, our financial performance for 2012 has
nonetheless been strong. 2012 performance includes the following
highlights which the Committee took into account in making its
remuneration decisions for 2012:
 Adjusted profit before tax was up 26% to £7,048m for the 12 months
ended 31 December 2012, with an improvement of 46% in Corporate
and Investment Banking, and 52% in Wealth and Investment
Management;
 Statutory profit before tax decreased to £246m (2011: £5,879m),
including own credit charge of £4,579m (2011: gain of £2,708m),
gain on disposal of BlackRock, Inc. investment of £227m (2011:
impairment/loss of £1,858m), £1,600m (2011: £1,000m) provision
for PPI redress, and £850m (2011: £nil) provision for interest rate
hedging products redress;
 The Investment Bank profit before tax increased 37% to £4,063m
driven by income growth of 13% and reduced operating expenses;
 Adjusted income was up 2% at £29,043m despite challenging
economic conditions, the continuing low interest rate environment
and non-recurrence of gains from the disposal of hedging
instruments in 2011 of £1,061m;
 Adjusted return on average shareholders’ equity increased to 7.8%
(2011: 6.6%) with improvements in most of our businesses. Statutory
return on average shareholders’ equity was negative 1.9% (2011:
positive 5.8%);
 Adjusted operating expenses were down 3% to £18,539m as we
reduced non-performance costs by 3% to £16,114m and
performance costs by 4% to £2,425m. Total incentive awards
declined 16% for the Group and 20% for the Investment Bank,
reducing the Investment Bank compensation: income ratio to 39%
(2011: 47%); and
 Core Tier 1 remained strong at 10.9% (2011: 11.0%). Risk weighted
assets reduced 1% to £387bn.
2012 incentive awards - headlines
 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; and
 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.
2012 incentives
barclays.com/annualreport78 I Barclays PLC Annual Report 2012