Chairman of the GRHRC
The Barclays Africa Group’s GRHRC mandate is to ensure that reward practices are aligned with shareholder interests, both in the performance of our employees and the Values they uphold. We strive to promote reward practices that foster sustainable high performance and accordingly, we reward both short and longer-term performance. All elements of pay are benchmarked against the market, as well as local and international best practice.
We ensure that the link between pay and performance is well understood. Our Balanced Scorecard translated our strategy into demanding performance metrics for 2015. The GRHRC evaluates prescribed officer and executive pay against this scorecard, which ensures rigorous concentration on business imperatives. This includes financial performance, with a focus on headline earnings, return on equity, cost-to-income ratio and other measures from our Balanced Scorecard, as well as delivery of individual performance commitments. Risk and conduct management is also carefully considered.
Our One Africa strategy is gaining momentum, which is reflected in some very pleasing results despite more challenging and uncertain economic and operating contexts. Headline earnings increased 10% and return on equity is at the highest level since 2008. These results reflect a highly skilled workforce, motivated and committed to deliver the goal of becoming the financial services group of choice in Africa.
For ease of reference, our remuneration report comprises three sections. The first includes our remuneration policy and structure. The second section details the execution of this policy in 2015 with a focus on executive directors’ and prescribed officers’ remuneration. The third section covers non-executive directors’ emoluments.
We are pleased to confirm that our remuneration approach and disclosure are fully compliant with the regulatory and statutory provisions relating to reward governance in all the countries in which we operate, and are in accordance with relevant regulatory requirements in the UK and European Union.
Achievements in 2015
- We actively sought shareholder views so as to further develop our remuneration reporting.
- We enhanced our reward approach, including the determination of our incentive funding pools, to ensure greater alignment with both financial and non-financial performance, as detailed in our Balanced Scorecard.
- We refined our reward approach for prescribed officers and members of the Executive Committee, to better reflect contributions to financial performance, other Balanced Scorecard metrics as well as personal objectives.
- We introduced a formal process, as part of the remit of the executive Remuneration Review Panel (RRP), to assess the impact and reward consequences of risk and conduct-related matters.
- With shareholder approval, we converted our phantom Share Value Plan to an equity plan to better align employee and shareholder interests.
- We further enhanced our formulaic incentives to ensure appropriate customer outcomes.
- We worked with advisers to enhance our reward effectiveness and reporting transparency.
- We continued to award higher fixed pay increases to more junior employees.
2015 pay decisions
2015 total compensation is up R1.44bn (7.9%), including salaries, which have increased R1.08bn (7.9%) year-on-year.
The 2015 compensation to net income ratio is 32.9%, up by 0.6% from 2014, while the compensation to profit before tax ratio remains flat at 48.2%. Both of these ratios are in line with our expectations.
The total executive directors’ and prescribed officers’ remuneration is up 1.4% mainly due to increases in fixed remuneration made in April 2015 to ensure better market alignment, including role based pay arrangements. Role based pay is a unique remuneration element that ensures that the reward of our prescribed officers and selected material risk takers remains competitive, given the impact of the European regulations.
Monitoring our pay mix is a GRHRC imperative to ensure that the proportion of fixed to variable pay remains within the 2:1 cap, as prescribed by the UK and European regulators.
All employees share in the overall performance of the Group. Accordingly, 50% of each business’ share of the incentive pool was determined based on performance against the Group’s performance. The balance was strongly differentiated by business unit performance.
The overall incentive pool has reduced by 2.3% in absolute terms, with a total value of R 2 458m. This includes retention awards to the value of R134m (down from R359m in 2014) granted under the Share Value Plan. If retention awards are excluded, the annual incentive pool is up 7.8%.
We continue to make a number of strategic hires to accelerate our strategy. Excluding these hires, average incentives are up 2.8% for employees receiving incentives for the full year 2014 and 2015.
Executive Committee incentives are down by 5.3% on the prior year.
We are committed to sound governance and this is reflected in our clawback and deferral approach, which is much greater than that of our competitors. For executive directors and prescribed officers, incentives were delivered 20% in cash in February, 20% as shares retained for six months and 60% deferred over three years subject to continued employment and malus provisions. For material risk takers, any deferred share awards are subject to an additional six-month retention period with shares releasing in September of each year. Clawback provisions are applicable to any incentives awarded since 1 January 2015 for material risk takers.
As required by Regulation 43 of the Banks Act, the remuneration of risk, compliance, legal and internal audit employees is determined independently within the function, rather than by the business they support, and within the parameters of the pool allocated to them by the GRHRC.
The Barclays Africa Long-Term Incentive Plan 2013 – 2015 will vest at 55% of the maximum, based on performance achieved against the metrics (plan details).
We will continue to focus our efforts on paying competitively to attract, retain and motivate top performers who deliver sustainable results in accordance with our Balanced Scorecard and Values.
Regulatory changes will increase the complexity of reward arrangements and could impact our competitive positioning. We will continue to be informed by ongoing engagement and dialogue with our stakeholders, including regulators, and seek the guidance of our advisers.