Corporate Governance

	Barclays report on remuneration
	Introduction
	Barclays seeks to ensure that reward policies are aligned with the objective of maximising shareholder value. This extends to all employees throughout the business, as well as executive Directors.
	Our reward vision and principles
	Barclays is committed to using reward to reinforce a strong performance culture whereby excellence is expected at every level throughout the businesses. Our Group-wide vision reflects the commitment: “Barclays values excellence: employees can expect outstanding reward for outstanding performance”. Barclays reward vision is supported by the following principles: align the interests of employees and shareholders to deliver value creation; recognise excellent performance of Group, business and individual; encourage the right behaviours to achieve excellent performance; reward is to be commercially competitive; managers are to be accountable for reward decisions; and reward is to be transparent, well communicated and easily understood.
	Changes in 2000
	The Incentive Share Option Plan (ISOP) was introduced to replace the Executive Share Option Scheme (ESOS) and the Performance Share Plan (PSP). No more awards will be made under either of these plans. Details of how the ISOP operates are set out on page 67. Shareholder approval for the ISOP was obtained at the annual general meeting on 26th April 2000 when shareholder approval was also obtained to: establish a new All-Employee Share Ownership Plan (AESOP); renew the SAYE Share Option Scheme (SAYE); and introduce the Equity Ownership Plan for Barclays Global Investors.
	Changes in 2001
	Building upon the reward vision and principles outlined above, it is intended that all employees should understand better what they need to do to achieve excellence and how this links to reward. The 2001 performance bonus for the executive Directors will be explicitly linked to Group Economic Profit (EP) performance during 2001 in addition to their individual performance measured against a set of personal objectives. The potential bonus for 2001 for superior individual performance combined with on-target EP results could trigger bonuses of 60% and 50% respectively of base salary for the Group Chief Executive and other executive Directors. Consistent with our commitment to performance based reward, bonuses could be zero if individual and/or Group performance were poor. Where an individual achieves outstanding performance and the Group exceeds its EP targets, this will be reflected in the level of bonuses. For 2001, the maximum bonus will be 150% of base salary for the Group Chief Executive and 125% for other executive Directors. We have completed a comprehensive review of the framework for the AESOP in the context of our reward vision and principles and intend to introduce the partnership shares element of the AESOP this year. The AESOP will enable employees to invest in Barclays PLC ordinary shares.
	The reward package
	The reward package for the executive Directors and other senior executives comprises: base salary; annual bonus and the Executive Share Award Scheme (ESAS); the ISOP; and pension arrangements.
	Base salary
	Base salary is payable monthly in cash, recognising an individual’s market worth. The policy is to review base salaries to ensure they are competitive relative to the practices of comparable organisations. Salaries for individual executive Directors are usually reviewed each year by the Board Remuneration Committee, recognising the individual’s performance and experience, as well as market practice.
	Annual bonuses and ESAS
	Individuals are awarded annual bonuses which drive the achievement of performance goals and reward individual and business performance. Annual awards normally comprise two components. Up to 75% of any award is paid as cash and the balance as an award of shares under ESAS see page 70 for details.
	ISOP
	The structure of the ISOP has been designed to provide more leverage for exceptional performance creating higher shareholder value. Under the ISOP, executives can exercise options granted over Barclays PLC ordinary shares at the market price at the time of grant, dependent on Barclays performance against set performance targets. For most participants, the performance target is based on the growth in Economic Profit (EP). For the ISOP, EP is a measure based on profit after tax, adjusted for risk tendency and minority interests less a charge for the cost of average shareholders’ funds. It is designed to encourage both profitable growth and capital efficiency. For the most senior participants, awards above a threshold will also be subject to an additional and tougher performance measure based on Total Shareholder Return (TSR) measured against the TSR of a financial services peer group. This comparator group comprises 11 UK and internationally based financial institutions, which have been chosen to reflect business and geographic mix. The Board Remuneration Committee sets a target award for each participant in line with market practice for comparable positions and reflecting individual performance. Options must normally be held for three years before they can be exercised and lapse ten years after grant, if not exercised. To ensure that growth is achieved on a sustained basis, no options will become exercisable if cumulative EP is lower than that of the previous three year period, including those options subject to the TSR performance target. Options subject to the EP performance measure, where the cumulative EP is below the target range at the end of the three year performance period, will become exercisable over half of the target award shares. Where the cumulative EP is above the target range, the options will become exercisable over double the number of target award shares. A relative ranking of sixth place or higher will result in those options subject to the TSR measure becoming exercisable at the third anniversary after grant. If the Company is ranked fourth, fifth or sixth in the comparator group, the options will become exercisable over the target award shares. If the Company is ranked third, second or first in the comparator group then the options will become exercisable over double, triple or quadruple the target award shares, respectively. However, if the Company is ranked below sixth after three years, there will be a retest on the fourth anniversary, over the full four year period. If the Company is not ranked sixth or higher after four years the options will lapse. In setting the performance targets, the Board Remuneration Committee has sought to encourage excellent business performance. For the options to be fully exercisable Barclays would have to be a leading business in its sector. See page 71 for details of executive Directors’ awards made in 2000.
	Pension arrangements
	Executive Directors’ pension benefits, normally payable from age 60, are either a pension calculated by reference to their pensionable salary and length of service or a money purchase arrangement. See page 69 for details.
	Service contracts
	The Group currently has service contracts with its Chairman, executive Directors and senior executives. The service contracts for Sir Peter Middleton, Mr Lendrum, Mr Stewart and Mr Varley, and other senior executives in the Group, provide for a notice period from the Group of one year, and normally for retirement at age 60. The unexpired term of the service contracts for Sir Peter Middleton, Mr Lendrum and Mr Stewart, who will each be seeking re-election at the annual general meeting in 2001, is 12 months. Peter Jarvis, Sir Brian Jenkins and Stephen Russell who will also be seeking re-election at the annual general meeting in 2001 do not have service contracts. Mr Barrett, who was appointed Group Chief Executive on 1st October 1999, has a service contract which provides for a notice period from the Group of two years during the first two years of the contract. The provisions give the Group the option of terminating the contract by making a pre-determined compensation payment equivalent to twice annual basic salary, pension contribution and expatriate allowance but excluding any compensation in relation to bonus. After two years, both the notice period and the pre-determined compensation reduce to one year. If Mr Barrett’s contract is terminated following a change of control of Barclays, pre-determined compensation is payable equivalent to twice annual basic salary, pension contribution, bonus and other benefits. These provisions were negotiated as part of the arrangements for Mr Barrett’s appointment. The Board Remuneration Committee has considered the extent to which executive Directors’ service contracts should deal with payments in the event of termination of the contract. Overall, the Committee’s approach when considering payments in the event of termination is to review all the relevant circumstances, including any commitments made in a Director’s service contract and the length of the notice period, and make its decision based on the information then available.
	Remuneration of non-executive Directors
	Non-executive Directors do not have service contracts with the Group. Their fees are determined by the Board and reflect their individual responsibilities, including membership of Board committees. Non-executive Directors are not normally eligible for bonuses. Appointments are initially made for a term of five years and a maximum of ten years, subject to re-election at intervals of no more than three years by the shareholders at the annual general meeting. Barclays encourages its non-executive Directors to build up a holding in the Company’s shares. Fees include an amount of not less than £7,500 which, after tax, is used to buy shares in the Company for each non-executive Director with the exception of Sir Andrew Large. These shares, together with reinvested dividends, are retained on behalf of the non-executive Directors until they retire from the Board. They are included in the table of Directors’ interests in ordinary shares of Barclays PLC on page 73.