Part three: Implementation of remuneration policy for financial year 2017

This implementation report details the principles implemented in 2017. Additional disclosures relating to senior managers and material risk takers are provided in our 2017 Pillar 3 risk and capital management report.

Fixed remuneration increases

Recognising the need to remunerate executive management fairly and responsibly in the context of overall remuneration, we award higher increases to junior levels than to executive levels, as shown alongside.

The following table details the fixed remuneration for executive directors and prescribed officers which will be effective from 1 April 2018 as well as for the previous three years.

Summary of 2017 total incentive outcomes

The annual discretionary bonus incentive pool has increased by 2% in absolute terms on a normalised basis, with a total value of R2 322m. A separate bonus pool of R184m was approved to support the Separation. Including the Separation bonus pool and restricted share awards, the total incentives increase is 5%.

Incentives as reflected in the income statement, including buy-outs of forfeited bonuses for a limited number of senior new hires, higher formulaic bonuses (in line with production and cost targets) and an accrual release in the prior year, increased by 8%. Excluding these items, the normalised incentive pool increased by 2% as reflected above, which is in line with performance.

Executive Committee incentives, included in the above table, have increased from R93m in 2016 to R95m in 2017, an increase of 2.6% on the prior year. If the 2016 pool is annualised for a full year of service for the Deputy Chief Executive Officer: Rest of Africa Banking, the 2017 pool is 3.3% lower than 2016.

Aligned with the restricted share awards in 2016, the RemCo granted restricted share awards to 53 key employees (to the total value of R156m), including executive directors and prescribed officers, to retain skills critical during the Separation and beyond. No further restricted share awards will be made in 2018. The details of the 2017 restricted awards were as follows:

Restricted share awards

  • Form of award: Shares under the rules of the Barclays Africa Share Value Plan.
  • Award date: 1 October 2017.
  • Performance period: Two years, ending on 30 September 2019.
  • Deferral periods: The deferral period for material risk takers will be aligned to the requirements as set out by the Prudential Regulatory Authority. The Group deferral approach will apply to non-material risk takers.

Performance conditions:

  • Individual performance rating of ‘strong’ or above through to the end of the performance period – this will be measured through key business and individual objectives, including a participant’s contribution to the Separation
  • Participant remaining an employee of Barclays Africa or Barclays PLC and not being under notice when the payment, award or recommendation is made
  • The employee not being under investigation or suspension when the award is made

The 2017 restricted awards for executive directors and prescribed officers are outlined below.

Short-term incentive awards

A summary of the Group’s and business units’ performance follows:

Barclays Africa: The 2017 financial results were satisfactory in a challenging macro environment, with normalised headline earnings increasing by 4% (7% in constant currency). We benefited from our diversified portfolio, as stronger growth outside South Africa supported overall performance. Return on equity at 16.4% (on a normalised basis) remained strong and largely in line with the prior year. Group earnings were marginally better than Board-approved target in constant currency terms.

South Africa Banking: Achieved 4% normalised earnings growth reflective of low revenue growth and supported by lower impairments. Low revenue growth partially reflects regulatory changes in RBB and slow balance sheet growth in a weak growth environment in South Africa; however, momentum showed some improvement in the second half of the year. Return on equity of 20.9% remains strong and in line with prior-year returns. South Africa Banking earnings were higher than the Board-approved target.

Rest of Africa Banking: Performance supported overall Group performance as normalised headline earnings growth increased by 24% in constant currency, and return on equity improved from 15.1% to 16.6%. Strong financial performance reflects lower impairments and strong top-line growth from Corporate, partially offset by material regulatory headwinds in Kenya. Rest of Africa Banking earnings were well ahead of the Board-approved target.

WIMI: Normalised earnings were 8% lower than the prior year following single name credit impairment in Wealth and higher claims in the Western Cape in the first half of 2017. Underlying performance was supported by improved claims management in South Africa Banking and Rest of Africa Banking and embedded value of new business improved reflecting the benefits of collaboration with RBB. Earnings were lower than the Board-approved target.

Individual performance, which included Balanced Scorecard results, was assessed by the RemCo for the award of short-term incentives to executive directors and prescribed officers. These are reflected in the outcomes shown in the following table:

1 Fixed remuneration refers to the cost-to-company and role based pay packages as at 31 December 2017.
2 Determined on individual performance and/or RemCo discretion.
3 The maximum is set at 200% of fixed remuneration as required by CRD IV.

Long-Term Incentive Plan and restricted share awards

The following table details the Long-Term Incentive Plan and restricted share awards made to executive directors and prescribed officers during 2017.

1 Based on cost-to-company plus role based pay as outlined above.

The performance criteria applicable to the 2017 Long-Term Incentive Plan awards are measured over a three year period. The criteria and relevant weightings are shown in the table below. Vesting periods, based on material risk taker status, vary from three to five-and-a-half years. The vesting period for all executive directors and prescribed officers is five-and-a-half years.

The vesting outcomes during the year are detailed in the Group’s consolidated and separate financial statements.

Termination of office payments

No payments were made on termination of employment or office of any members of executive management.

Executive directors and prescribed officer remuneration outcomes

Peter Matlare was appointed on 1 August 2016, and thus the 2016 earnings reflected are not for the full year.

Jason Quinn was appointed Financial Director 1 September 2016.

1 On his appointment as Financial Director, Jason’s cost-to-company increase incorporated the termination of his role based pay.

Single total figure remuneration

This table provides a summary of all remuneration that is received or receivable for the reporting period, and all the remuneration elements that it comprises, where applicable disclosed at fair value.

1 The annual bonus comprises the total bonus earned and settled within one year (from financial year-end). Therefore, the annual bonus in the table above includes both the immediate cash payment, as well as deferred components, settled within one year.
2 The deferred remuneration includes:
2017: Deferred bonus earned for the 2017 financial period but settled from 2018 onwards. The fair value of the restricted shares granted in the 2017 financial period.
2016: Deferred bonus earned for the 2016 financial period but settled from 2017 onwards. The fair value of the restricted shares granted in the 2016 financial period.
3 No long-term incentive remuneration is reflected. Grants made in 2017 under the Long-Term Incentive Plan have a three-year performance period, and will be included in the year in which they vest. Grants made in 2017 are detailed above.

Minimum shareholding requirements

The RemCo is confident that, based on awards made this year, the shareholding of each executive director and prescribed officer is progressing at the rate required to attain the minimum shareholding requirements.

Statement regarding compliance with remuneration policy

The RemCo has satisfied itself that the remuneration policy as detailed in the 2017 remuneration report was complied with, and there were no substantial deviations from the policy during the year.

Increase in non-executive directors’ fees

Special resolution 3 in the notice of annual general meeting, sets out the proposed non-executive directors’ fees for the period 1 May 2018 to 30 April 2019. A general increase of 5.5% has been applied to the previous fees.

Advisory vote on the implementation report

The implementation report as it appears above is subject to an advisory vote by shareholders at the 2018 annual general meeting. Accordingly, shareholders are requested to cast an advisory vote on part three of this remuneration report (implementation report for the financial year 2017).

Approval of remuneration report by the Board of directors

This remuneration report was approved by the Board of directors on 12 March 2018.