Remuneration report

One of the key principles of our remuneration philosophy is that stakeholder views are considered when we design remuneration policies and determine pay outcomes. In practice, this means listening to and engaging with our stakeholders, including our shareholders, employees and regulators, as well as considering broader societal factors.

Our Fair Pay agenda helps us to engage with different stakeholders on pay. Key highlights for 2019 include the agreement of a new one-year pay deal with Unite, with an above inflation budget of 2.75%, and with higher increases for the most junior entry grades. We have also started to expand globally our UK living wage commitment by working with the Fair Wage Network. Separately, the Committee has focused on reviewing wider workforce policies as well as their pay outcomes in more detail. We have a strong partnership with Unite in the UK, and actively engage with Works Councils in other locations.

We discussed our new plans for the DRP with major shareholders. The discussions were informative and productive, and we thank our shareholders for their willingness to engage. The main change, aligned with our Fair Pay agenda, is a reduction in pension allowance for the Executive Directors. This voluntary change by the Executive Directors is set out in more detail on page 88 of the Annual Report.

While we have considered alternative variable pay structures for the Executive Directors, we cannot see a superior acceptable approach and so have decided to retain the existing structure. We will keep this under review as market practice develops.

Rewarding sustainable performance is a crucial aspect of our remuneration philosophy and so the Committee spent considerable time understanding performance. While it was another challenging year with global macroeconomic and political uncertainties at play, profit before tax excluding litigation and conduct (PBT) is up 9% from 2018. Group return on tangible equity excluding litigation and conduct (RoTE) is 9.0%, in line with our target for 2019, and costs are also in line with our 2019 guidance of less than £13.6bn. Our capital position is strong, with a CET1 ratio of 13.8%. The Committee recognises that significant progress on financial performance has now been achieved over a sustained period.

Non-financial performance has also been strong. Customer and client outcomes are positive, with improvements in Net Promoter Score® (NPS) for Barclays UK and Barclaycard, and an increase in the take-up of mobile banking. Complaints in Barclays UK are down 8% from 2018, though we recognise we need to go further and faster. Our employee engagement survey score is down slightly on 2018, driven by various factors including the tools and resources available to employees. This is already an area of management focus and investment for the Group. Considering our broader impact on society, global carbon emissions are down by 53%, and we have helped over 2 million people improve their employability skills through LifeSkills.

Over the years, we have considered the appropriate balance between returns to shareholders and rewarding employees. This year, the Committee has approved an incentive pool of £1,490m, down 10% from 2018. After much deliberation, we feel that this outcome strikes the right balance between our shareholders and our employees, enabling us to further improve returns to our shareholders while also maintaining a competitive pay opportunity for our wider workforce.

The annual incentive outcomes for Jes Staley and Tushar Morzaria are assessed with reference to a set framework against pre-determined financial, strategic and personal measures and objectives. For 2019, performance against the financial objectives (representing 60% of the overall measures) has been very strong, with targets exceeded. Strategic and personal performance has also been strong – full details of this assessment are set out on pages 104 to 109 of the Annual Report.

Using the framework, the annual bonus outcomes for Jes Staley and Tushar Morzaria were 83.3% and 84.3% of maximum respectively. The Committee considered these outcomes in the context of pay outcomes for the wider workforce for 2019.

As part of its deliberations, the Committee noted that the outcomes for the Executive Directors were increasing at a time when the overall incentive pool was decreasing. While recognising that this is not an unusual outcome given the structured formulaic approach applied to Executive Directors’ incentives (e.g. in 2018, Executive Directors’ outcomes were down slightly, while the overall incentive pool was up), the Committee determined that for 2019 it would be appropriate to apply a discretionary reduction to the formulaic Executive Directors’ outcome in line with the broader pool reduction. Applying the 10% discretionary reduction results in a bonus outcome of 75.0% for Jes Staley and 75.9% for Tushar Morzaria.

Separately, the Committee decided to make an award under the 2020-2022 Long Term Incentive Plan (LTIP) cycle to both Executive Directors with a face value at grant of 120% of Total fixed pay, reflective of the strong 2019 performance.

The outcome of the 2017-2019 LTIP, which is due to vest in June 2020, is set out on pages 109 to 111of the Annual Report.

We will continue to focus on our Fair Pay agenda during 2020, including reviewing living wages for locations outside of the UK, US and India. We will also look to further our work on pay simplification, and will continue to engage with our shareholders and other stakeholders on pay.