Barclays 2014 Annual Report Download - page 80

78 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Governance: Remuneration report
Total compensation costs are down 8%, and the compensation to
adjusted net income ratio for Barclays Group is at 37.7%, down from
38.7% in 2013. In the Core business the ratio is at 35.7%, an
improvement of 50 basis points, and therefore tracking at the target
level of mid-thirties. The average value of incentive awards granted per
Group employee in 2014 is down 17% at £14,100 (2013: £17,000).
Following these 2014 decisions, the incentive pool has reduced by
£1.62bn from £3.48bn in 2010, an overall reduction of 47%, while
adjusted profit before tax over the same period is up 18% if the costs
to achieve Transform are excluded. Over this period the compensation
to adjusted net income ratio has reduced from 42.4% in 2010 to 37.7%
in 2014.
Remuneration and Risk
As a Committee, we are committed to linking pay with performance
and to making adjustments to remuneration to reflect risk and conduct
events. Risk and conduct events are considered as part of the
performance management process and reflected in incentive decisions
for individuals. All employees have their performance assessed against
objectives (the ‘what’) as well as demonstration of Barclays’ Values and
Behaviours (the ‘how’). We have a clear process for making
adjustments for poor conduct at an individual level. This is
underpinned by a robust governance process overseen by the
Remuneration Review Panel and this Committee. We remain absolutely
focused on making the required and appropriate adjustments both to
individual remuneration decisions as well as the overall incentive pool
where required.
Although no resolutions have yet been reached with the relevant
investigating authorities, the Committee has adopted a prudent
approach in relation to any potential settlements in respect to the
ongoing Foreign Exchange trading investigations. The 2014 incentive
pool has, as a result, been adjusted downwards by the Committee.
The Committee will, however, keep this matter under review.
It is the Committee’s intention that individuals who are accountable,
responsible or directly culpable for risk and conduct matters are subject
to remuneration reductions as appropriate. This will include reductions
to bonus and unvested deferred awards (i.e. malus reductions). While
investigations are ongoing, individuals who are under investigation will
be subject to suspensions of variable remuneration, in line with our
Values and the expectations of our stakeholders including regulators.
For current employees who are directly culpable, disciplinary action up
to and including dismissal may also result.
Regulatory developments
Our 2014 variable pay decisions were taken against a background of
significant regulatory developments and market pressures. Being a UK
headquartered global organisation, Barclays is subject to UK regulatory
requirements on remuneration clawback, which exceed what is
required under CRD IV. This is in addition to EU developments including
the introduction of the 2:1 maximum ratio of variable to fixed pay, as
well as the extension of the scope of Material Risk Taker (MRT)
identification. As the requirements apply to Barclays’ expanded MRT
population globally, this creates significant adverse competitive
consequences. The Committee is concerned by the challenges in
attracting and retaining key staff needed to run the bank safely in all
regions.
Key remuneration changes and decisions for executive Directors
in 2014
Remuneration for executive Directors continues to be tied closely to
our strategy and performance.
In considering the executive Directors’ 2014 performance against the
Financial, Balanced Scorecard and personal measures set at the
beginning of the year, the Committee has decided to award an annual
bonus to Antony Jenkins of £1,100,000 (57% of maximum bonus) and
to Tushar Morzaria of £900,000 (64% of maximum bonus). Further
details are set out in the annual report on Directors’ remuneration on
pages 87 and 88.
Based on solid 2014 overall performance, and in particular the
considerable progress made against the Group Strategy, we regard
these bonuses as appropriate and deserved. In considering final bonus
outcomes, executive accountability for significant Group-wide conduct
issues including, for example, the ongoing Foreign Exchange
investigations was taken into account. Our decisions also demonstrate
that the principle of paying competitively and paying for performance
applies equally to our most senior executives as it does to the rest of
Barclays’ employees.
The Committee has agreed that the executive Directors’ fixed pay will
remain unchanged for, and will not be reduced during, 2015. Antony
Jenkins’ base salary will remain at £1,100,000 and he will also receive
RBP unchanged at £950,000. Tushar Morzaria’s base salary will remain
at £800,000 and he will also receive RBP unchanged at £750,000.
During the year, we also undertook a review of Barclays’ Long Term
Incentive Plan (LTIP). We reviewed the performance measures to
ensure they support our updated Strategy and align the interests of
executives and shareholders. Following engagement with our
shareholders, we have changed the financial measures for the LTIP
award to be granted in 2015 and given them an increased weighting of
60%. The weighting of the Balanced Scorecard will be unchanged at
30% and Loan Loss Rate will remain as a risk measure but with a
reduced weighting of 10%. Further details are set out in the annual
report on Directors’ remuneration on page 88. The Committee decided
to make awards under this LTIP cycle to both executive Directors with a
face value at grant of 120% of their respective fixed pay at
31 December 2014.
We are not proposing any changes to the Directors’ Remuneration
Policy which was approved at the 2014 AGM. Accordingly, our 2014
executive Director remuneration decisions are consistent with that
approved Policy, which limits the maximum value of annual bonus and
LTIP awards in accordance with the CRD IV 2:1 maximum ratio of
variable to fixed pay. Clawback has been introduced with effect from
1 January 2015. Following the European Banking Authority (EBA)
Opinion on allowances, the terms of RBP may need to be revised
once further guidelines are available from the EBA.
Agenda for 2015
The Committee remains focused on controlling remuneration costs
and ensuring that pay incentivises all of our employees to deliver
sustained performance in a manner which is consistent with Barclays’
Values and Behaviours and in the long term interests of shareholders.
The alignment of remuneration and risk will remain a priority. We
expect to continue to have to navigate through a changing regulatory
landscape and will engage constructively with regulators and
shareholders as we do so.
Our remuneration report
The report has been prepared in accordance with the remuneration
disclosures required by the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations 2013. The
Remuneration report (other than the part containing the Directors’
Remuneration Policy) will be subject to an advisory vote by
shareholders at the 2015 AGM.
On behalf of the Board
Sir John Sunderland
Chairman, Board Remuneration Committee
2 March 2015
Annual statement from the Chairman of the Board Remuneration Committee