Salz Review - Wall Street Journal

135
Salz Review
An Independent Review of Barclays’ Business Practices
11.21 We identified two particular compensation arrangements which seemed to us to be
inconsistent with normal practice and met with some public criticism. The granting
of options in BGI to senior Barclays Capital executives went through appropriate
governance processes. While it is common for executives in asset management to
enjoy shadow equity schemes, there was some criticism of Barclays extending BGI
equity to executives who were primarily employed elsewhere in the Group. Others
pragmatically respond that BGI was an exceptional success story of value creation
for the Group and that this would not have happened without the talents of the
executives concerned. A second example relates to the compensation arrangements
for the specialist team involved with the Protium transaction. In that case the
arrangements were justified in terms of the considerable value to the Group in
having specialist skills available to manage the portfolio of Barclays’ assets at a time
when asset values were key to Barclays’ survival.
11.22 More broadly, during 2010 and 2011 approximately £6 billion in total was paid out
to staff in incentive pay at a time when total shareholder return was down 34% and
dividend payments totalled only £2.7 billion. 212 Many of Barclays’ peers pursued a
similar approach, although not all. For example, during the same period dividends
paid by Société Générale, HSBC and Standard Chartered were significantly higher
than total incentive payments, 213 although we recognise that their business mix is
different.
11.23 In the absence of any regulatory or accounting requirement to treat bonus payments
to employees in the same way as dividend payments to shareholders, Barclays might
wish to consider how best to achieve some cash symmetry for shareholders. It could
be helpful for the Board to go beyond an agreed ratio of total compensation to net
income and agree with shareholders in advance the dimensions of a scorecard on
which to decide the ratio between capital requirements, dividend payout and
bonuses. This approach could perhaps be built into the statement of future
remuneration policy that new UK regulation will likely require companies to
agree with shareholders every three years. 214
11.24 Given the prevailing state of the market for jobs in investment banks and the extent
of reputational damage and public anger, we believe that the current environment
presents a unique opportunity to make significant changes to the way remuneration
policy is developed and applied across the financial services industry. In saying this,
we are mindful that Barclays competes in a global market for talent and this provides
some real constraints in meeting UK public expectations on bank pay. Many
employees care principally about pay relativities. While their primary point of
comparison will be with their peers internally, they will likely be aware of the
comparisons within the wider community in which they see themselves. So in
New York, for example, Barclays competes for talent with New York banks locally.
212 Incentive pay stated is the income statement charge for total incentive awards (Total incentive awards
granted, less deferred bonuses awarded, add current year charges for deferred bonuses from previous
years, and add ‘other’ incentives). Source: Barclays, 2012 Annual Report, March 2013. See Page 235
(Consolidated Cashflow). Dividends paid to equity holders of the parent company were £1.2 billion for
the same time period – see appendix H.
213 Société Générale, HSBC and Standard Chartered annual reports.
214 Department for Business Innovation and Skills, Proposals for Improved Transparency of Executive Remuneration;
June 2012.