Overview of 2016
Performance and remuneration
We recognise remuneration is an area of particular interest to shareholders and regulators. In setting and considering changes to remuneration, it is critical we listen to and take account of their views and insights. We have continued enhancing our disclosures, including ensuring fair and responsible2 remuneration.
The audited remuneration tables are disclosed in our 2016 consolidated and separate financial statements.
Disclosures relating to senior managers and material risk takers are provided in our 2016 Pillar 3 risk management report.
|1||An organisation’s Gini coefficient represents the degree of variation of remuneration of its employees. The value is between 0 and 1, where 0 indicates that all employees are paid the same.|
|2||Fair and responsible remuneration is defined as ensuring executive remuneration is reviewed in the context of overall remuneration within Barclays Africa. This includes remuneration decisions which are made in the context of sharing value that takes shareholders, customers and all level of our employees into account.|
Our response to remuneration matters raised by shareholders is outlined below:
|Disclosure of executive remuneration needs to be enhanced and the link between performance and reward needs to be more transparent.||Additional disclosures, including the bonus pool for executive directors and prescribed officers, have been included to enhance the transparency between performance and remuneration. This includes a simplified disclosure of executive bonuses, including the split between Group, business and individual performance.|
|Executives need to have enhanced exposure to the share price.||Minimum shareholding requirements have been introduced for all Executive Committee members.|
|There is a lack of long-term incentive awards to align executive pay with shareholder interests.||We intend to grant forfeitable performance shares under our Long-Term Incentive Plan in 2017. In accordance with the plan’s rules, these will vest in three years, subject to the achievement of key financials and strategic targets. This will further align executive reward with shareholder value.|
|Critical leadership needs to be retained to protect shareholder value.||Forfeitable restricted shares, with a two-year performance period, have been awarded to 74 executives with skills critical to the successful separation from Barclays PLC. Further awards will be granted in 2017 to ensure key skills are protected.|
|There has to be fair and responsible pay across the Group.||We continue to award higher pay increases at the more junior levels. This is reflected in our 2016 Gini coefficient of 0.44.|
Pay and performance highlights
We considered the following Barclays Africa performance headlines in making compensation decisions in 2016:
- Group headline growth of 5% (2% growth in South Africa and 17% in the Rest of Africa) as income outpaced cost increases
- Return on equity declined slightly to 16.6%
- Revenue growth of 8% underpinned by consistently strong contribution from our Rest of Africa and Corporate and Investment Bank
- Cost-to-income ratio improved from 56% in 2015 to 55.2% in 2016
Our decisions on total compensation were made against the backdrop of these performance headlines, while considering our compensation trends over prior years. The outcomes of our decisions on the Group’s total compensation for 2016 can be summarised as follows:
- The compensation to net income ratio is 32.7%, which is 0.2 percentage points lower than 2015.
- The compensation to pre-compensation profit before tax increased by 0.8 percentage points.
- Total compensation increased to R20.828bn (5.1%), of which salaries increased to R15.917bn (5.5%). The year-on-year changes illustrate our continued focus on these ratios and generating quality earnings with a focus on costs.
- The ratio of our annual bonus pool to headline earnings continued to reduce in 2016 (15.2%).
Our remuneration approach and disclosures fully comply with regulatory and statutory provisions relating to reward governance in all the countries in which we operate. They are also in accordance with relevant regulatory requirements in the United Kingdom and European Union.
We have changed the structure of this report to align with the principles and recommended practices of King IV as we demonstrate our continued commitment to strong corporate governance:
- This report is split into three sections: Section A details our remuneration policy and governance, Section B addresses the implementation of the remuneration policy in 2016, and Section C highlights changes envisaged in 2017.
- We have increased transparency, to ensure fair and responsible pay through the disclosure of relative measures such as our 2016 Gini coefficient (calculated by VASDEX Associates Proprietary Limited – a specialist performance and reward consultancy).
- We enhanced the disclosure of executive performance to demonstrate alignment of remuneration with performance.
- As required by Regulation 43 of the South African Banks Act (Act no. 94 of 1990), 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 we allocated to them.
- We have continued focusing on compliance with the European Union’s Capital Requirements Directive (CRD) IV, and, in particular, the 2:1 maximum ratio of variable to fixed pay, additional holding periods and clawback provisions for material risk takers.