Barclays 2013 Annual Report Download - page 50

2013 compensation and incentive headlines
 Total compensation costs decreased 1% to £9,616m.
Total compensation costs in the Investment Bank were slightly
down at £4,634m (2012: £4,667m)
 This reduction in compensation costs in part offset the reduction
in adjusted net operating income and meant that the Group
compensation to adjusted net operating income ratio increased
slightly to 38.3% (2012: 37.5%)
 There has been strong differentiation on the basis of individual
performance to allow the Group to more effectively manage
compensation costs
 While the final incentive pool is up on 2012, it is £1,106m or 32% below
the 2010 outcome from when the Committee started its repositioning
journey to reduce compensation. In the Investment Bank,
incentive awards granted were 41% (£1,086m) below 2010 levels
 Before making adjustments for risk and conduct events,
the 2013 incentive awards of £2,492m had been reduced 18%
from 2012. After adjustments for risk and conduct, total incentive
awards granted were £2,378m, up 10% on 2012
 Levels of deferral continue to significantly exceed the PRA
Remuneration Code’s minimum requirements and are expected to
remain among the highest deferral levels globally. 2013 bonuses
awarded to Managing Directors in the Investment Bank were
100% deferred.
Dear Shareholders
The Committee’s objective is to maximise long term value for
shareholders by ensuring that we do not pay more than is necessary
while remaining competitive.
Remuneration Committee work in 2013
Determining the 2013 incentive pool was an extremely difficult decision
for the Committee. We were acutely aware of public sentiment and of
the challenge of presenting shareholders with an increased pool in a
year where profits have fallen. The Committee concluded that a 2013
incentive pool of £2,378m was warranted. This was up 10% on the final
2012 incentive pool but it remains 32% below pool levels in 2010 when
we started to reposition Barclays’ remuneration. Before adjustment for
risk and conduct events the incentive pool was down 18% on 2012.
Significant progress has been made since 2010 in addressing imbalances
in remuneration. The Barclays’ incentive pool reduced by 38% between
2010 and 2012 (48% for the Investment Bank) and bonuses for Managing
Directors in the Investment Bank are fully deferred. The dilemma faced by
the Committee in 2013 was that these actions were not matched by our
peers, most notably the major US banks who are among our primary
competitors. As a result, our lack of pay competitiveness was beginning to
cause demonstrable damage to our business, especially outside the UK.
The global resignation rate for senior staff in 2013 was significantly above
that in 2012. This was particularly marked in the Investment Bank with a
near doubling of resignations of senior staff in the US. In making our 2013
decisions on incentives, the Committee sought to ensure the health of the
franchise in the long term interest of shareholders.
As in 2012, consideration of risk and conduct events was an important
aspect of the Committee’s work during 2013. We made total reductions
of £290m to incentives for PPI, Interest Rate Hedging Products and other
events. Of this, £176m of adjustments were made through reductions in
LTIP awards that were granted in previous years and £114m of reductions
were made to the 2013 incentive pool. This contrasts with risk and
conduct adjustments to the incentive pool of £860m in 2012 for events
including the investigation into the setting of inter-bank offered rates.
‘Our aim is to deliver a greater share of the income we
generate to shareholders while remaining competitive
on pay. Although profits for 2013 were down, the 38%
reduction in incentives in the previous two years had begun
to cause demonstrable damage to our business. The difficult
decision to address this by increasing incentives in certain
key areas is in the long term interest of shareholders.
We remain fully committed to reducing the ratio of
compensation to adjusted net operating income over time.’ When determining the incentive pool we looked at it on a pre- and
post-adjustment basis for risk and conduct events. The Committee
concluded that an incentive pool for 2013 of £2,492m on a pre-adjustment
basis was appropriate. This is 18% down on the equivalent pre-adjustment
pool in 2012. After applying an adjustment for risk and conduct events of
£114m, the final 2013 incentive pool is £2,378m, up 10% on 2012,
reflecting the lower level of risk and conduct adjustment for 2013.
A significant part of the Committee’s work in 2013 was reviewing how
to restructure executive Director and senior executive remuneration for
compliance with new EU regulation, the Capital Requirements Directive
IV and, in particular, the capped ratio of variable to fixed pay. Our
approach is based on a new class of fixed pay called Role Based Pay. We
are seeking shareholder approval at the 2014 AGM for a maximum
ratio of variable to fixed pay of 2:1. For executive Directors, the level of
Role Based Pay will be capped for the term of the policy and will be
delivered in shares which will be subject to a holding period of up to
five years to ensure alignment with shareholders. The Committee has
recognised that in return for greater certainty there should be a
reduced total remuneration opportunity.
Focus in 2014
The Committee will continue to focus on the need to pay at levels
required to attract, retain and motivate our people. While not paying
more than we judge to be necessary, we will ensure that we can
continue to pay our people competitively and simultaneously seek to
deliver a greater share of the income we generate to shareholders. We
will be informed in this work by a continuing constructive engagement
and dialogue with our shareholders and our other stakeholders.
I encourage you to read our full Remuneration report on pages 89 to 125
of the 2013 Annual Report or at www.barclays.com/annualreport.
On behalf of the Board
Sir John Sunderland
Chairman, Board Remuneration Committee
3 March 2014
barclays.com/annualreport
48 Barclays PLC Annual Report 2013
Summary remuneration report