Remuneration report

The Committee believes that our pay outcomes for 2017 reflect overall Group performance, recognising improvements in profit before tax and significant achievements in restructuring the Group, while acknowledging the need for further improvement in returns.

• Performance and pay

  2017 has been a year of significant strategic progress for the Group, achieving a number of milestones to deliver a simpler organisation. These include the sell down of our shareholding in Barclays Africa Group Limited (BAGL), the closure of Non-Core and the launch of the Group Service Company. A great deal has been accomplished in relation to the UK ring-fencing requirements, establishing the necessary entity structure, processes and governance.

  As well as positioning the simplified Group for growth in 2018, Barclays has achieved a CRD IV fully loaded Common Equity Tier 1 (CET1) ratio of 13.3%, within the end state target range. Group profit before tax (PBT) is up 10% from 2016 to £3,541m driven by an £882m reduction in operating expenses.

  Against this background, the Committee approved a Group incentive pool of £1,506m, down 2% from 2016. This decision recognises the strong strategic execution across the Group, while being clear that Group returns are not yet where our shareholders, and the Board, want them to be. The Committee also recognises the need to ensure that areas of strong performance within the businesses are rewarded competitively, with key talent retained to deliver against our growth strategy going into 2018 and beyond. This pool also reflects appropriate adjustments for risk and conduct matters, which continue to be taken very seriously by the Committee.

• Key remuneration decision for executive Directors

  The Committee considered the executive Directors’ performance against the financial and strategic/non-financial performance measures which had been set to reflect company priorities for 2017. Separately, performance against their personal objectives was assessed on an individual basis.

  Based on Jes Staley’s performance against the performance measures set at the beginning of the year, the Committee approved a 2017 bonus of £1,065,000 (48.5% of maximum) of which 62.4% will be deferred in shares for a period of up to seven years. The Committee’s deliberations on his 2017 personal performance have taken account of delivery against financial commitments including achieving the end state target range for the CET1 ratio as well as improvements to our cost: income ratio, while recognising that there is still some way to go in getting returns to where management, the Board and our investors expect them to be.

  The Committee has also taken account of the early completion of the strategic restructuring, including the sell down of BAGL and closure of Non-Core. The Committee noted the significant work that has taken place in planning following the EU referendum outcome. The Committee also recognised that Jes Staley has made continued progress towards ensuring a high performing culture in line with our Values, and Barclays has made improvements in some customer and client metrics such as a reduction in customer complaints, while noting the need for further improvement. As announced last year, the Committee will keep Jes Staley's 2016 variable remuneration under review pending the outcome of the investigation relating to his involvement in a whistleblowing matter. The Committee will make a final decision on outcome once that investigation is complete.

  Based on Tushar Morzaria's performance against the performance measures set at the beginning of the year, the Committee approved a 2017 bonus of £747,000 (50.5% of maximum) of which 46.5% will be deferred in shares for a period of up to seven years. The Committee in particular noted that Tushar Morzaria had been instrumental in the execution of the strategy including the sell down of BAGL, the closure of Non-Core, the setting up of the ring-fenced bank in the UK and in Barclays achieving its end state range capital position. Tushar Morzaria has also demonstrated effective management of key external stakeholders.

  The Committee decided to make an award under the 2018-2020 Long Term Incentive Plan (LTIP) cycle to Jes Staley and Tushar Morzaria (based on their performance in 2017) with a face value at grant of 120% of their respective Total fixed pay at 31 December 2017. The Committee reviewed the performance measures of the LTIP to ensure they are appropriate given our growth strategy and align the interests of executive Directors and shareholders. Return on tangible equity (RoTE) and cost: income ratio have been retained as the key financial metrics, with the weighting on RoTE increased to 50% to emphasise the focus on improving returns across the Group. The calibrations have also been established to maintain direct alignment with the Group's financial targets. The weighting on the cost: income ratio remains unchanged at 20%. CET1 ratio remains a key financial metric, but given the end state target range of c13% has been achieved, the Committee concluded that this would now be more appropriate as an underpin measure on RoTE instead of a standalone measure.

  In line with the Directors’ remuneration policy (DRP) approved at the 2017 AGM, both executive Directors’ Fixed Pay will be unchanged for 2018 at £2,350,000 for Jes Staley and £1,650,000 for Tushar Morzaria.

• Fair pay agenda

  We are committed to fair pay, ensuring that all our employees are appropriately and fairly rewarded for their contributions. This concept touches on many areas of our work, including fair pay for the lowest paid in our organisation, as well as the alignment of executive reward outcomes with business performance. Additionally, the Board is committed to individuals being able to progress through the organisation based on capability and performance and irrespective of any other difference such as gender, age, ethnicity, religion, sexual orientation or disability. We take employees' views into consideration throughout our deliberations and continue to review potential approaches to build on this.

  Barclays’ commitment to fair pay is illustrated by the repositioning of the incentive pools over recent years, during which incentive funding has been directed to provide more to junior employees, and our active engagement on pay matters with our unions to ensure that our staff are fairly treated across the organisation. The current 2017-2019 pay deal with Unite commits to a 7.5% agreed salary increase budget for the Unite recognised population and a minimum increase of 10% for the most junior graded employees over the course of the three year deal. Barclays is also a long-standing supporter of the Living Wage under which Barclays commits to pay all UK permanent employees and those UK employees of third party contractors at least the current London or UK Living Wage. This is a commitment which we have also extended to our UK employed apprentices. By March 2018, the entry level for permanent, non-apprentice employees will already be above the Living Wage target level set for 2020 by the Government, two years early. Similarly, Barclays will meet the 2020 target level for its apprentice population by 2019.

• Looking ahead

  The Committee continues to monitor with interest the Government's proposals in respect of the UK Corporate Governance Code, which will be an area of focus for the Committee and the Board going into 2018.

  In relation to fair pay, we have already chosen to publish our pay ratios on page 110 of the Annual Report 2017, two years in advance of the Government requirements to reflect the ratios between the pay of our Group Chief Executive and our UK employees. We will continue to review our fair pay policies and practices to ensure that they remain appropriate as this important topic continues to evolve.

  We will also continue to work on the remuneration aspects of changes associated with Structural Reform, such as the addition of Remuneration Committees representing the two main subsidiary businesses.

  We will, of course, continue to engage constructively with regulators, shareholders and other stakeholders and value the insight these discussions provide.