Part two: Remuneration policy and governance – overview of main provisions
2017 elements of remuneration – pre regulatory deconsolidation
While we apply a common remuneration structure across the Group, we differentiate its implementation according to local market practice and statutory or regulatory requirements. Remuneration is split between fixed and variable elements – variable elements reward the achievement of Group, business unit, team and individual objectives. In the table below we summarise the elements of remuneration as they applied in 2017 (pre regulatory deconsolidation).
|Salary||Included as part of cost to company and reflects an individual’s role, specific skills and experience, and provides the basis for a competitive remuneration package. We position pay at the market median, while remuneration for critical skills is positioned above the market median to attract talented individuals with outstanding track records.|
|Role based pay||Created due to the regulatory environment to which we are exposed. Role based pay is not considered as salary (or cost to company) for pension and benefit purposes, unless legally required in a particular geography. Role based pay only applies to material risk takers and will fall away post regulatory deconsolidation, at which point fixed pay will be aligned with the market. 29 material risk takers received role based pay in 2017. Our Chief Executive Officer’s role based pay was previously delivered through 50% phantom shares and 50% cash. Our Chief Executive Officer is no longer a member of the Barclays PLC Executive Committee, and as such her role based pay from July 2017 was paid monthly in cash to align with other Barclays Africa executive directors.|
|Lifestyle benefits||Competitive benefits (including pension, insurance etc.) appropriate to an employee’s role and location.|
|Annual bonus (non-deferred)||For executive directors, prescribed officers and material risk takers, 50% of the non-deferred bonus is delivered in cash, and 50% is delivered as shares which are released after 12 months (as a Share Incentive Award – refer below). Executives are given the choice to defer 100% of the annual bonus into shares. For all other employees, 100% of the non-deferred bonus is delivered in cash subject to the provisions set out under the deferred bonus below. All cash portions of the bonuses are paid in March.|
|Share Incentive Award (non-deferred)||For executive directors, prescribed officers and material risk takers, 50% of any non-deferred bonus award is delivered as shares at or around the time that the award is paid. This releases after 12 months in March of the following year.|
|Annual bonus (deferred)||
|Long-term incentives||Executive management (including other senior management and key employees) are eligible, at the discretion of the RemCo, to participate through annual awards. Awards, the quantum of which is based on appropriate market benchmarks, carry dividend equivalents (except for material risk takers) and performance conditions, with a performance period of three years. These will vest between three and five- and-a-half years depending on an individual’s material risk taker status. Where regulatory limitations still apply, the RemCo will apply discretion to delay the vesting of awards to ensure compliance with the relevant requirements.|
Determination of 2017 short-term bonus incentive pools
The RemCo determined the 2017 bonus pools based on affordability and performance, and the continuing requirements of CRD IV on the same basis as prior years by following the principles below:
- The RemCo determined overall Group, business unit and function bonus pool limits using the prior year’s base and adjusting it based on the Group’s and individual business units’ performance. In addition, we adjusted bonus pools, as appropriate, for adverse risk and control events.
- Managers then recommended bonus awards within the overall limits after having assessed individual performance against personal objectives and behaviour in line with our Values. A robust process ensures individuals who were accountable, directly or indirectly, for adverse risk events had their remuneration adjusted appropriately.
- Consistency checks were then conducted at Group, business unit and function level.
- The RemCo reviewed and approved proposed senior manager awards. The aggregate Group bonus pool was finally approved by the Group Audit and Compliance Committee, based on the Group’s 2017 performance.
Service contracts and termination arrangements
For our executives and prescribed officers, our approach to payments in the event of termination takes account of the individual circumstances, including the reason for termination, individual performance, contractual obligations and the terms of the short-term or long-term incentive.
All executive directors and prescribed officers have a six-month notice period, with their potential compensation for loss of office being six months’ fixed remuneration.
Executive directors may be required to work during the notice period, or may be placed on garden leave, or if not required to work, the full notice period may be provided with pay in lieu of notice (subject to mitigation where relevant).
Treatment of role based pay
Role based pay ceases to be payable from the termination date. Therefore, it will be paid during the notice period and/or garden leave, but not where Barclays Africa elects to make payment in lieu of notice (unless otherwise required by law).
Treatment of annual bonus on termination
There is no automatic entitlement to bonus on termination, but it may be considered at the RemCo’s discretion and subject to performance measures being met and pro rated for service. No bonus will be payable in the case of gross misconduct or resignation.
Treatment of unvested deferred bonus awards
Outstanding deferred bonus awards would lapse if the executive director or prescribed officer leaves by reason of resignation or termination for gross misconduct. However, in the case of death, or if the executive director or prescribed officer is an eligible leaver defined as leaving due to injury, disability or ill health, retirement, redundancy, or in circumstances where Barclays Africa terminates the employment, he/she would continue to be eligible to be considered for unvested portions of deferred awards – subject to the rules of the relevant plan – unless the RemCo determines otherwise in exceptional cases. Deferred awards are subject to malus provisions which enable the RemCo to reduce the vesting level of deferred bonuses (including to nil).
In an eligible leaver situation, deferred bonus awards may be considered for release in full on the scheduled release date unless the RemCo determines otherwise in exceptional circumstances.
Treatment of long-term incentive awards
Each long-term plan is treated in accordance with its individual rules.
Adjustments to bonuses for adverse risk and conduct matters
All deferred awards are subject to continued employment and malus provisions. Under these provisions, we may reduce the level of vesting of deferred awards, including to nil, where (but not limited to):
- a participant deliberately misled the Group, the market and/or shareholders in relation to the financial performance of the Group;
- a participant caused harm to our reputation, or where their actions amounted to misconduct, incompetence, poor performance or negligence;
- there is a material restatement of the Group’s financial statements;
- there is a material failure of risk management in the Group; and/or
- there is a significant deterioration in the Group’s financial health.
The Remuneration Review Panel follows a robust process for considering risk and conduct matters and the associated consequences reflected in individual incentive decisions. When considering individual responsibility, they take a variety of factors into account, such as whether the individual:
- was solely responsible for the event, or whether others were also directly or indirectly responsible;
- was aware (or could reasonably have been expected to be aware) of the failure;
- took or missed opportunities to take adequate steps to address the failure; and
- by virtue of seniority, could be deemed indirectly responsible, including employees who drive the Group’s culture and set its strategy.
Where appropriate, we adjust the remuneration of individuals who were directly or indirectly accountable for an event. This includes reductions in current year bonus and in vesting amounts of deferred awards through the application of malus.
Following the recommendations of the Remuneration Review Panel, we determined that certain bonus pools and/or individual awards will be reduced after considering risk and conduct events within the business. Clawback applies to any variable remuneration awarded to a material risk taker from 1 January 2015. The RemCo may apply clawback at any time during the seven-year period from the date on which variable remuneration is awarded, if:
- there is reasonable evidence of employee misbehaviour or material error; and/or
- the Group or business unit suffers a material risk management failure, taking account of the individual’s proximity to and responsibility for that incident.
Minimum shareholding requirements
To ensure greater executive exposure to the share price and alignment to shareholders, Executive Committee members are required to have a minimum shareholding of 150% of their annual cost to company (salary and benefits, but excluding role based pay). This must be built up at a rate of at least 20% per annum over five years from 2016.
New reward strategy, 2018 and beyond
We are developing a new remuneration policy, which will underpin our strategy, entrepreneurial culture and risk management approach. The reward policy is being informed by issues raised by our institutional investors and changing regulatory landscape, and we will continue our active engagement with shareholders as this progresses.
Advisory vote on the remuneration policy
The remuneration policy 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 two of this remuneration report (remuneration policy and governance – overview of main provisions).
Measures to be taken if the vote is less than 75%
In the event that the remuneration policy and/or the implementation report have been voted against by 25% or more of the voting rights exercised at the annual general meeting, the Board commits to steps in good faith and with best reasonable effort, towards the following at a minimum:
- An engagement to ascertain the reasons for the dissenting votes
- Appropriately addressing legitimate and reasonable objections and concerns raised, which may include amending the remuneration policy, or clarifying or adjusting remuneration governance and/or processes
In addition, the background statement of the remuneration report following such negative voting will disclose details on:
- whom the company engaged, and the manner and form of engagement to ascertain the reasons for dissenting votes; and
- the nature of steps taken to address legitimate and reasonable objections and concerns.
Policy regarding non-executive directors’ fees
The proposed fees for non-executive directors are approved by the Directors’ Affairs Committee and are recommended to Barclays Africa Board for approval and inclusion for shareholders vote at the annual general meeting.