Barclays 2013 Annual Report Download - page 93

How do you justify a 2013 incentive pool of £2,378m when the bank’s
financial performance has declined?
When considering the appropriate level of incentive awards for 2013,
the Committee has had to establish the right balance between ensuring
that the progress on repositioning remuneration, which began after
2010, was sustained, while also ensuring Barclays remains competitive
and remuneration continues to reflect performance both before and
after adjustment for risk and conduct events.
As set out in the 2012 Remuneration report, we took measured risks in
2012 by further driving down the total incentive pool. Barclays has been
closely monitoring the effects of this decision and it has become clear
that this repositioning has created a risk that in certain parts of our
business we are not sufficiently competitive on pay in relation to the
wider market. As a result, we have suffered from higher rates of
resignation and found it harder to recruit. This issue needed to be
addressed to ensure the health of our franchise and that we remain
true to our policy of paying competitively.
In line with financial performance, the Committee has approved a total
incentive pool on a before adjustment for risk and conduct events basis
that is 18% down on the equivalent 2012 pool. However, as the level of
adjustment required in 2013 is considerably less than that required in
2012, after adjustment for risk and conduct events, the final incentive
pool is £210m up on 2012.
The final 2013 incentive pool of £2,378m and its increase from 2012
needs to be seen in the context of the multi-year reductions already
achieved, the severe competitive pressures sustained within some parts
of the business, the reduced risk and conduct adjustments required in
2013 and the overall repositioning journey that the Committee remains
focused on achieving in a way that ensures that the long-term value of
the Bank is maximised for shareholders.
You made an adjustment for risk and conduct events of £860m to your
2012 bonus pool and also reduced the value of unvested deferred and
long-term awards by £300m. What have you done in terms of
adjustments to the 2013 pool?
As in 2012, the total incentive awards in 2013 were determined after
making appropriate adjustments to reflect risk and conduct events.
Total risk and conduct adjustments of £290m were made in 2013. Of
this, £176m of adjustments were made through reductions in
long-term incentive awards that were granted in previous years and
£114m of reductions were made from total incentive awards granted in
2013. The two main components of the 2013 adjustment reflect the
further provisions in respect of the costs of redress for PPI and Interest
Rate Hedging Products.
The process for reviewing risk and conduct adjustments to the
incentive pool has also been strengthened in 2013 by the formation of
the Remuneration Review Panel which provides recommendations to
the Board Remuneration Committee. The Panel is independent of the
business and it includes representatives from the key control functions
of Risk, Compliance, Internal Audit and HR. The Panel’s other
responsibilities include reviewing proposed malus adjustments to
individual incentives in respect of risk and conduct events and ensuring
that risk, compliance, behaviour and conduct are also appropriately
considered in the determination of individual remuneration.
Why do you need to pay bonuses at all?
Barclays needs to pay competitively to ensure it has people with the
skills and experience needed to deliver our strategy. In some parts of
the banking sector, particularly investment banking, variable
remuneration in the form of bonuses forms a high proportion of an
employee’s total remuneration. This structure has the advantage of
giving Barclays the ability to reduce total remuneration significantly in
underperforming areas and manage and control the cost base.
However, it also means that in business areas that perform to a
satisfactory or good standard, higher variable remuneration is required
to make employees’ total remuneration competitive.
How were the bonuses determined for the executive Directors?
The Committee decides executive Director bonuses, as it also does for
members of the Group and business Executive Committees, and for
other senior employees.
Executive Director bonuses are determined by reference to Group and
individual performance in the year. Achievement of their objectives is
assessed against both quantitative and qualitative measures, both
financial and non-financial.
On 3 February 2014, Antony Jenkins announced that he would decline
any 2013 bonus offered to him by the Board, citing the rights issue,
restructuring costs and costs associated with legacy issues as his
reasons.
Why is Tushar Morzaria receiving a bonus of £1.2m for 2013?
On joining Barclays, Tushar forefeited any right to participate in the
JP Morgan incentive arrangements for 2013. His bonus for 2013 reflects
his forfeited remuneration opportunity and also takes account of
Tushar’s performance for Barclays in 2013.
The award will be delivered in accordance with Barclays’ regulatory
requirements and remuneration policy. 40% of the total will be an
upfront award (half in shares and half in cash) and 60% of the total will
be made as a deferred share award releasing in three equal instalments
over a period of three years. Any shares released will be subject to a
further six month holding period from the date on which they are
released.
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