Barclays 2012 Annual Report Download - page 82

2012 incentives continued
Incentive pool proposals from each of the businesses were subjected to detailed scrutiny and challenge through a sequence of the Committee’s
meetings before and after the year end. The final incentives pool reflects the actions taken by the Group Chief Executive and the Committee
towards achieving the long term objective of sustainably reducing compensation levels over time. It also reflects appropriate risk adjustments
made in respect of significant risk and compliance issues that have impacted Barclays in 2012 and the need to retain talent within Barclays to
execute the new business strategy.
The table below summarises the three steps taken by the Committee in finalising the 2012 incentives pool.
Step 1 Adjustment for performance – The Committee considered the overall performance of Barclays and individual
businesses. The Committee also looked at any significant events and one off transactions that have had a
material impact on the financial results. The approach of the Committee is to use statutory profits as a starting
point and then consider the impact of each adjustment. The Committee does not regard own credit as reflective
of performance and accordingly excludes these amounts from its consideration. The Committee manages
compensation based on a range of compensation ratios and is supported by advice from the Group Finance
Director and Chief Risk Officer. Holding the compensation ratios broadly flat to 2011 would have suggested an
increase of £700m to the incentives pool.
Step 2 Adjustments to reflect risk events in 2012 – The Committee made adjustments to the 2012 incentives pool
totalling £860m. In addition, adjustments were made to unvested deferred and long term incentive awards.
Further details on the risk adjustments made in 2012 are provided below and on the next page.
Step 3 Additional adjustment to reposition Barclays in the market – The Committee’s objective is to reposition
Barclays remuneration in the market and achieve a sustainable compensation ratio over time. The Committee
has made a further adjustment of £250m to make progress in achieving its objective, and the resulting 2012
incentives pool represents the starting point in 2013, i.e. the adjustments for risk events in 2012 and the market
repositioning will not be added back in 2013.
Determination of the 2012 total incentives pool
£m
2011 total incentives pool 2,578
2011 compensation to adjusted net operating income ratio of 42%
Step 1 Adjustment for performance 700
Step 2 Adjustments to reflect risk events in 2012 (860)
Risk adjustments:
LIBOR: 290
Redress of PPI and interest rate hedging products and other
risk adjustments: 570
Step 3 Additional adjustment to reposition Barclays in the market (250)
To reflect Barclays intention to reposition itself in the market
The compensation to adjusted net operating income ratio reduced from
42% in 2011 to 38% in 2012
2012 total incentives pool 2,168
In addition to the reduction in variable remuneration described above, fixed remuneration reduced by 7% year on year. This was driven by a
reduction in salary costs reflecting a moderately declining headcount and reductions in the cost of post retirement benefits primarily reflecting
scheme closures and benefit changes in the US and Spain, and lower interest cost for the UK Retirement Fund.
barclays.com/annualreport80 I Barclays PLC Annual Report 2012