Salz Review - Wall Street Journal

117
Salz Review
An Independent Review of Barclays’ Business Practices
outcomes, have agreed and published an overall set of board objectives in
meaningful detail. This improves the accountability of the board for its effectiveness,
enabling shareholders to judge what it considers important and how well it succeeds
in achieving the objectives. We suggest that Barclays considers this.
Recommendation 14: Board effectiveness
The Board must be actively engaged in the process of improving its own
effectiveness, including through regular and rigorous evaluations. The Board
should report openly on the evaluation process, set forward-looking objectives
for improvement and explain progress against these objectives.
Engagement with Shareholders
9.76 Our discussions with shareholders suggest that some feel their concerns have not
always been listened to by the Barclays Board. Some told us, for example, that they
had raised concerns about executive pay and Board oversight well before the 2012
Annual General Meeting (AGM). There is no doubt that Barclays was faced with
some difficult issues, including the bonus for the Group Chief Executive and certain
tax equalisation matters. Not resolving shareholder concerns appears to have led to
significant votes against both the Remuneration Report and the reappointment of the
Remuneration Committee Chairman. We suggest that, overseen by the Chairman,
there should be more discussion and openness over a course of time to avoid this
sort of stand-off. This, of course, requires engagement by shareholders as well as by
Barclays. HSBC’s annual reports feature an extended description of the methodology
and judgments behind variable pay awards for executive directors, supported by
quantitative disclosures. Openness should in principle provide a better basis for
annual discussions with shareholders on remuneration. 192
9.77 Many shareholders also raised concerns about Barclays’ financial information which
they regarded as difficult to understand, even by the standards of an industry beset
by complexity in its disclosures. Many commentators have expressed opinions similar
to Andrew Bailey who, on the point of the risk-weighting system, recently said: “We
need a lot more transparency to the outside world… I talk a lot to investors and the
analyst community… and they do not understand it and they have lost confidence in
it… Do not just dump data into the world: please have meaningful, sensible
disclosure.” 193 A recent publication by the European Banking Authority also found
significant variations in the way a sample of banks calculate Risk Weighted Assets
(RWAs) – only half of which could be explained by objective factors like asset mix
(see also Appendix J). 194
192 HSBC Holdings plc, 2012 Annual Report, March 2013, pp. 347-367.
193 House of Commons Treasury Committee, Bank of England November 2012 Financial Stability Report, Oral and
written evidence, 14 February 2013, ev 10;
http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/873/873.pdf.
194 European Banking Authority, Interim results of the EBA Review of the Consistency of Risk-Weighted Assets,
February 2013; see also Appendix J.