Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
134
the enormous growth in investment bank top-line revenue, the ‘commission’ mindset
(whereby a small percentage of a large number gets allocated to the producer)
leads to very high pay awards. It had become difficult, they said, to determine what
the appropriate share should be. So while there might be an intellectual case for
paying exceptional performers handsomely (the so-called ‘stars’ or ‘rain-makers’),
there seems to be little logic for the inflationary trickle down to less exceptional
colleagues. One interviewee observed that the scandal of banker pay was less that of
the star performer, but of the mediocre banker who, under the umbrella of a star and
benefiting from the franchise of a top investment bank, received disproportionate
reward simply for being there.
11.18 Total compensation at Barclays was over £10 billion in 2010 and 2011, and
£9.8 billion in 2012. Of this £3.5 billion was paid out as incentive pay in 2010,
£2.6 billion in 2011 and £2.4 billion in 2012. Total compensation has come down
since pre-crisis levels, most notably in the investment bank where average salary plus
bonus per employee in 2012 was down 30% over 2007 (having been higher than
2007 in three of the four succeeding years). On average, in both the investment and
retail banks, compensation levels for most roles in Barclays have been in line with
peers. The exception to this is the Group’s 70 or so most senior or highly-paid
executives. 210
11.19 Compensation for the ‘group of 70’ was consistently and significantly above the
median compared to peer banks. For example, in 2010 average pay to these
executives was overall 35% more than the market benchmark for their positions.
This level has come down over the past two years. In 2011 average pay for these
executives was 17% more than the market. 211 Pay in excess of benchmarks was in
large part caused by several senior staff transferring from the investment bank to
different, less well-paid roles, without adjustment in pay to reflect the ‘going rate’ for
the new position. It is likely that these movements themselves had a ripple effect on
other packages – with the result that in different parts of the bank Barclays was
paying different rates for the same job – including paying well over the going rate for
some positions. We recognise that moving individuals around the Group may result
in those individuals receiving above-market compensation for a particular role for a
period of time, but the knock-on effects seem inappropriate. In general we are
supportive of increased mobility of senior executives across the Group (see
Recommendation 20). Having substantially the same rates for essentially similar
jobs will assist mobility.
11.20 One of the difficulties surrounding the debate about bankers’ pay is that there is no
shared view of how to divide the pie between owners and employees – particularly
given the difficulty of distinguishing individual contribution from the umbrella value
of the franchise.
210 For the purposes of the report we defined this group as including Executive Committee members in
Group, RBB, WIM and CIB; IB employees earning more than £5m; and any employees in RBB, WIM
and CB who are one of the top ten highest earners in their business unit but are not on the Executive
Committee. This group received the most scrutiny from the Board Remuneration Committee, and the
number of executives varied slightly year on year.
211 Benchmark data for 2012 was not yet available to make a similar comparison for the most recent financial
year.