governanceplus BARCLAYS PLC Meeting Date: Fri, 27 Apr 2012 11:00 Proxy Deadline: Sun, 25 Mar 2012 Type: AGM Issue date: Thu, 05 Apr 2012 Meeting Location: Royal Festival Hall, Southbank Centre, Belvedere Road, London SE1 8XX Current Indices: FTSE 100 FTSE EuroFirst MSCI Europe Sector: Banks PROPOSALS ADVICE 1 Receive the Annual Report The Business Review meets guidelines. There are adequate employment and environmental policies, with quantitative environmental reporting. Dividends were paid during the year under review and it is noted that the company did not put the same for shareholder approval, which in PIRC's view is a material omission. The accounts are affected by accounting issues material to net assets and profits. It must be emphasised that this is a problem with accounting standards. The issues operate to the disadvantage of shareholders. The specific problems – that PIRC has been able to ascertain with reasonable certainty total £6,724m (12% of Net Assets), and - are:- > bonuses, now disclosed (outside of the accounts on page 64 of the annual report), but not charged of £2bn (2010: £1.7bn, compared to PIRC’s estimate in 2010 of £1.4bn). > provisions for bad debts clearly expected, of at least £1,012m (page 133, £506m x 2: the number in the Basel capital adequacy note is 50% of the 1 year expected loss.), meaning assets and profits are overstated by at least that amount. It would be reasonable to assume at least the same again, as existing loans do not merely default in the subsequent year, representing £2,024m. It is particularly relevant that the, unaccounted for, expected loss has gone up this year. > taking credit for an unrealised gain for fair value of own debt £2.7bn. > other unrealised gains, which would require inside information to quantify. Section 393 Companies Act 2006 requires that accounts give a true and fair view. There is a general misunderstanding that a true and fair view means following accounting standards, that is not the case, and most certainly not when accounting standards produce an outcome that is defective against the true and fair view principle of the law. Aspects of IFRS conflict substantially with that, however, Section 393, the true and fair view, is the main requirement of the Act. In law the true and fair view is the minimum standard of accounting to prudently show net assets and profits sufficient to show both solvency and distributability of profits to enable the directors to discharge their duties properly based on the audited accounts, including assessing the going concern position. That cannot be achieved if assets are carried at more than realisable value in the accounts or, likely liabilities are omitted from the accounts. There are faults with IFRS generally, and in respect of particular standards, both contrary to the true and fair view principle. The position of the true and fair view is clear in statute, case law, and Financial Reporting Review Panel decisions in respect of prior problems with accounting standards (e.g. the case of Liberty International PLC in 2002). It is also the position of European Court of Justice decided cases, and Article 15 of the 2nd Directive (Capital Maintenance), Sections 830 et seq of Companies Act 2006. PIRC notes that French banks have overridden IFRS on occasions. The impact of the above is that the company appears to have made more profits Oppose
Transcript
governanceplus
BARCLAYS PLCMeetingDate:
Fri, 27 Apr 201211:00
ProxyDeadline:
Sun, 25Mar 2012
Type: AGM Issuedate:
Thu, 05 Apr2012
MeetingLocation:
Royal Festival Hall, Southbank Centre, Belvedere Road, London SE18XX
CurrentIndices:
FTSE 100 FTSE EuroFirst MSCI Europe
Sector: Banks
PROPOSALS ADVICE
1 Receive the Annual ReportThe Business Review meets guidelines. There are adequate employment andenvironmental policies, with quantitative environmental reporting. Dividends werepaid during the year under review and it is noted that the company did not put thesame for shareholder approval, which in PIRC's view is a material omission.
The accounts are affected by accounting issues material to net assets andprofits. It must be emphasised that this is a problem with accounting standards.The issues operate to the disadvantage of shareholders.
The specific problems – that PIRC has been able to ascertain with reasonablecertainty total £6,724m (12% of Net Assets), and - are:-
> bonuses, now disclosed (outside of the accounts on page 64 of theannual report), but not charged of £2bn (2010: £1.7bn, compared to PIRC’sestimate in 2010 of £1.4bn).
> provisions for bad debts clearly expected, of at least £1,012m (page 133,£506m x 2: the number in the Basel capital adequacy note is 50% of the 1year expected loss.), meaning assets and profits are overstated by atleast that amount. It would be reasonable to assume at least the sameagain, as existing loans do not merely default in the subsequent year,representing £2,024m. It is particularly relevant that the, unaccounted for,expected loss has gone up this year.
> taking credit for an unrealised gain for fair value of own debt £2.7bn.
> other unrealised gains, which would require inside information to quantify.
Section 393 Companies Act 2006 requires that accounts give a true and fair view.There is a general misunderstanding that a true and fair view means followingaccounting standards, that is not the case, and most certainly not whenaccounting standards produce an outcome that is defective against the true andfair view principle of the law. Aspects of IFRS conflict substantially with that,however, Section 393, the true and fair view, is the main requirement of the Act.
In law the true and fair view is the minimum standard of accounting to prudentlyshow net assets and profits sufficient to show both solvency and distributabilityof profits to enable the directors to discharge their duties properly based on theaudited accounts, including assessing the going concern position. That cannot beachieved if assets are carried at more than realisable value in the accounts or,likely liabilities are omitted from the accounts.
There are faults with IFRS generally, and in respect of particular standards, bothcontrary to the true and fair view principle. The position of the true and fair view isclear in statute, case law, and Financial Reporting Review Panel decisions inrespect of prior problems with accounting standards (e.g. the case of LibertyInternational PLC in 2002). It is also the position of European Court of Justicedecided cases, and Article 15 of the 2nd Directive (Capital Maintenance),Sections 830 et seq of Companies Act 2006.
PIRC notes that French banks have overridden IFRS on occasions.
The impact of the above is that the company appears to have made more profits
Oppose
than it actually has when determined on a prudent basis.
2 Approve the Remuneration ReportOnce again, disclosure is nebulous and the remuneration structure remainscomplex. The company favours heavier reporting on the most recently approvedplans, while keeping the older (but still outstanding) plans with minimumdisclosure. The value of awards given to the CEO could not be ascertained withreasonable accuracy owing to the rather confusing disclosure. However his bonusaward and the long term incentive award made during the year under reviewamounts to some £11.8m in value, this being roughly around nine times his basesalary. Share schemes exercises during the year under review produced a gain ofabout £13.8m, representing more than 10 times his salary.
We notice that Lloyds has clawed back bonuses from executives, includingamounts in respect of mis-selling of personal protection insurance. Futher,Barclays also has had PPI costs, which would suggest clawback is alsoappropriate here. In view of the fact that Barclays’ shares are trading far below netasset value, we cannot think of any circumstances in which a Chief Executivewho was part of a team when the bank got into that predicament should bereceiving any bonus at all, indeed the board should also be considering clawbacks itself. The bank is trading at below net asset value because the marketperceives that it is destroying shareholder value, and/or its that its net assets areoverstated, meaning that performance has been overstated. Although the bankhas not failed in the classic sense, trading at below net asset value is aninvestment failure from the perspective of the shareholders. Any bonus – includingcompensation for differential tax rates - is evidence of the inappropriateness of ascheme that delivers such a result in such circumstances.
Furthermore, an argument for high levels of executive remuneration is that there isa going rate for international executives which includes their need to move fromtheir normal domicile, if that is the case then any differential tax (due torelocation) should already be reflected in the going rate for the job.
Overall, it does appear that given the remuneration committee has considerablediscretion, the above indicate reasons for using it to substantially limit, oreliminate bonuses.
If the remuneration committee has in effect lost its negotiating rights, by havingpay locked into a predetermined process, irrespective of the predicament that thecompany may be in, then that is an indictment of the scheme. PIRC hascommented consistently on the proliferation and complexity of the variousschemes.
Lastly, the executive’s contracts allows for unearned bonuses in a change ofcontrol event. This is not considered best practice. Rating DED.
Oppose
3 Re-elect Marcus AgiusChairman. Considered independent on appointment by PIRC.
For
4 Re-elect David Boothon-executive director. Independent by company, independent by PIRC.
For
5 Re-elect Alison CarnwathIndependent Non-executive director. She missed three audit committee meetingswhich she was eligible to attend, which would be grounds for recommendingabstention. However in view of the fact that she is also chairman of theRemuneration Committee, which is awarding bonuses when the company tradesat a discount to Net Asset Value, it is recommended to oppose.
Oppose
6 Re-elect Fulvio ContiIndependent Non-executive director. He missed one audit committee meetingwhich he was eligible to attend.
Abstain
7 Re-elect Bob DiamondChief Executive. 12 month service contract.
For
8 Re-elect Simon FraserNon-executive director. Independent by company, independent by PIRC.
For
9 Re-elect Reuben Jeffery III For
Non-Executive Director. Independent by company, independent by PIRC.
10 re-elect Sir Andrew LikiermanNon-executive director. Independent by company. Independent by PIRC.
For
11 Re-elect Chris LucasFinance Director. One year rolling contract, however termination provisions includea notional bonus element, which PIRC considers to be contrary to best practice.Concerns over various elements of remuneration policy is reflected in ourrecommendations on resolutions to approve remuneration policy and to re-elect amember of the remuneration committee.
For
12 Re-elect Dambiso MoyoNon-executive director. Independent by company. Independent by PIRC.
For
13 Re-elect Sir Michael RakeIndependent Non-executive director. He has been chairman of the AuditCommittee since March 2009. As expressed in resolution 1, the company hasthe responsibility to produce true and fair financial accounts. There seems to be amisconceived belief that simply following the IFRS standards leads to true and fairfigures in a set of accounts. The ultimate body responsible for such differencesand ascertaining that IFRS standards are only used as a guide to demonstratethe true state of affairs of the company is the Audit Committee, and consequentlyits chair. Owing to the material differences from what was reported and what PIRCbelieves to be the true picture, it is recommended to oppose the re-election of theChair of the Audit committee.
Oppose
14 Re-elect Sir John SunderlandNon-executive director. Independent by company. Independent by PIRC.
For
15 Appoint the auditorsPricewaterhouseCoopers LLP proposed. The non-audit fees incurred during theyear under review are £4m. This represents 10.3% of the audit fees paid. On athree year aggregate, non audit fees are less than 25% of the statutory auditfees.
However, the statutory auditor failed to ascertain that the company's accountssimply follows IFRS rules, without however emphasising the "true and fair" viewrequirement.
Oppose
16 Allow the board to determine the auditors remunerationRoutine item.
For
17 Approve Political DonationsApprove Political Donations In accordance with section 366 of the Companies Act2006, the company is seeking authority to make political donations notexceeding £25,000, and incur political expenditure of £100,000, valid until the nextAGM. The company is seeking authority due to the wide definition of politicaldonations in the Act. The company does not make donations to political parties,but rather ensure that issues and concerns affecting the Group are consideredand addressed. Acceptable proposal.
For
18 Issue shares with pre-emption rightsAuthority to issue one third or two thirds of the issued share capital and expiresat the end of the next AGM. The board's independence is considered adequateand all directors are subject to annual re-election. The authority is within limits.
For
19* Issue shares for cashAuthority to issue up to 5% of the issued share capital, which expires at the endof the next AGM. Within guidelines.
For
20* Authorise Share RepurchaseAuthority limited to less than 10% of the issued share capital and expires no laterthan the next AGM. Within acceptable limits.
For
21 Meeting notification related proposalThe proposed resolution responds to the implementation of the EU ShareholderRights Directive into English law. Under the new regulations, which came intoforce on 3 August 2009, the minimum notice period for general meetings (otherthan Annual General Meetings) increases to 21 days. However, it is possible toreduce this to 14 days. For a general meeting to be called on 14 days thefollowing conditions must be met: (a) that shareholders have approved the holdingof general meetings on 14 clear days' notice by passing an appropriate resolution
For
at an AGM; and (b) that the company offers "the facility for shareholders to voteby electronic means accessible to all shareholders".
PIRC continues to believe that all companies should aim to provide at least 20working days notice for all general meetings in order to give shareholderssufficient time to consider what are sometimes complex issues. However, webelieve that the safeguards that are in place providing for use only in relation to ageneral meeting not a class meeting, the increased use of electroniccommunication (including the particular requirement for electronic voting), andannual approval, are all sufficient to allow shareholders to support theamendment. Also, it is open to shareholders to register their concern over thelength of a notice period provided in their voting choice on a resolution at themeeting in question. In addition, companies will still be obliged to provide a longernotice period for major transactions such as takeovers and mergers. PIRC willmonitor the situation and where the authority is utilised during the year and webelieve that shareholders rights have been infringed we will recommend votingaccordingly on the renewal of such proposals.
* = Special Resolution
GOVERNANCE
The company states in its annual report "As Barclays is listed on the London Stock Exchange, we comply withthe UK Corporate Governance Code (the Code). For the year ended 31 December 2011, we have complied with therelevant provisions set out in the Code and applied the principles of the Code as described in this report. Furtherinformation on the Code can be found at www.frc.org.uk."
Directors
Barclays' Chairman has made a public statement about the objective of having 25% female representationon the board by end of 2015, in line with Davies report. He stated that by end of 2013, the board shouldcomprise at least 20% women. There are currently two women on board.
Sir Richard Broadbent left the board in September 2011. The new SID is Sir Michael Rake.
The balance of executives and non-executives is adequate and the level of independence on the boardacceptable.
Remuneration
Disclosure of executive pay this year is yet again opaque and design of executive pay is overly complex.This prevents analysis of the design and quantum of executive pay. Moreover, issues affecting accountingprofits in first instance, make appraisal of pay difficult or practically impossible.
Credit being given in the pay scheme for executives complying with regulatory capital requirements despitealthough that should already feature as a basic contractual requirement as the directors have fiduciaryduties to be going concerns, which the audited accounts should be discharging.
The mandatory TSR performance disclosure shows under performance against the FTSE 100 index over fiveyears to 2011 and contrasts with incentive award policy over the same five year period.
All executive directors have one year rolling contracts however termination provisions include bonuses, whichwe consider to be contrary to best practice.
The company is trading at a discount to net asset value, an unusual position for a bank, suggesting aprojection of the destruction of shareholder value, or an overstated balance sheet. It is difficult to see whyany bonuses should be paid to directors of any bank in that predicament who have been employed in theperiod in which it got into that predicament.
The CEO’s tax equalisation payment of £5.7m is not justified, as this should already be factored in the goingrate for an executive of his level, owing to the fact that being the CEO he is required to be internationallymobile.
Remuneration consultants have been used who have produced a poor scheme. The scheme seems to havegone wrong because in Delaware Law Directors are able to limit liability for breach of duty or trust, fiduciaryduties are limited, these things have needed to be supplemented by regulatory duties on executives andunder management. In importing US based pay schemes, credit is being given these, though such dutiesare not able to be limited out of director liability in UK Company Law.
Audit and reporting
The non-audit fees incurred during the year under review are £4m. This represents 10.3% of the audit feespaid. On a three year aggregate, non audit fees are less than 25% of the statutory audit fees.
The committee's policy on award of non-audit work is set out. The Chairman of the Committeeapproves/denies requests for the auditors to conduct non-audit work above the stated threshold of £100,000.Although the lower threshold for tax related non-audit work is stated it is not clear which categories of workare pre-approved within the £25,000 limit.
Share capital and shareholder relations
The company proposed a final dividend of 3.0p per share for the fourth quarter, making the total dividend 6.0pfor the year.
OPERATING AND FINANCIAL REVIEW OR BUSINESS REVIEW
Company's Primary Objective and/or Strategy
The company's strategy is to deliver superior performance through diversification by business, geographyand funding sources, and relentless focus on customers and clients
Key Performance Indicators
Barclays clearly discloses its financial and non-financial KPIs, and describes what it is that each KPIcontributes to business success. In addition each KPI supports a different consistent strategic priority. Non-financial KPIs include customer satisfaction and employee engagement.
PIRC Analysis
We consider that the company's Business Review complies with ASB RS guidelines. In particular wewelcome the clear and informative disclosure of the company's financial and non-financial KPIs. Thecompany has also clearly disclosed its strategy going forward.
We acknowledge that there is a comprehensive discussion with regards to the company’s customers andemployees, for example, and how these stakeholders impact on business performance. However, we haveconcerns over the level of disclosure within the Business Review with respect to their responsible lendingpractices, which are reportedly completed in accordance with the Equator Principles. More specifically,further reporting within the Business Review on how Barclays plc manages and mitigates the environmentaland social risks of its business decisions and activities, particularly in high risk sectors would helpstakeholders understand the management of this material issue. We note that the company does disclosethis information in its 2010 Sustainability Review and on its website in a manner that is satisfactoryespecially when compared to certain members of its peer group. However, there is no up to-dateSustainability Review available to review as of the date of this report, the Business Review lacks informationabout the company's environmental and social activities and there were no specific targets on ESG matters.We will keep this matter under review moving forward.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Environment
Environmental policy in place.
Board level responsibility for environmental matters identified.
Stakeholder engagement procedures for environmental matters in place.
Environmental targets and achievement on targets are reported in the CSR report 2010 and on the companywebsite.
Employment
Employment policies are in place.
Board level responsibility for employment related matters identified.
Stakeholder engagement procedures for employment related matters appear to be in place.
The company undertakes annual employee opinion surveys. The company has a variety of otherperformance indicators relating to employee turnover, resignation and sickness absence rates.
Community
The company does not disclose global cash contributions but notes its commitment in 2011 of £30.3m incommunity support in the UK, including charitable donations of £22.6m.
No political donations were made in Europe or the UK during the year.
Absa Group Limited, in which the Group acquired a majority stake in 2005, made donations totalling£224,158 in 2011 (2010: £123,295) in accordance with its policy of making political donations to the majorSouth African political parties as part of their Democracy Support Programme. Donations are made toparties with more than three seats in the National Parliament as confirmed by the Independent ElectoralCommission. The Group made no other political donations in 2011.
Issue alert
Barclays is currently under FSA investigation after claims that it mis-sold SWAPs to business customers.Barclays admitted that a confidentiality clause was added in error (bbc.co.uk), in that customers wereasked to keep the SWAP deal confidential from the FSA.
FINANCIAL PERFORMANCE
2011 £
2010 £
2009 £
Year End 31 December 31 December 31 December
Earnings per share (p) 25.10 30.40 86.20
Dividend per ordinary share (p) 6.00 5.50 2.50
FINANCIAL ADVISORS & COMPANY CONTACT
Company Secretary Lawrence Dickinson
Company Address 1 Churchill Place, London, E14 5HP
PIRC assesses a non-executive director's independence according to PIRC's shareholder guidelines. Commentsrepresent PIRC's analysis based on information in the report and accounts. A = audit committee, R = remunerationcommittee, N = nomination committee, C = CSR or Ethics Committee, * = committee chairman.
Board changes during year (after previous AGM): Sir Richard Broadbent, Deputy Chairman and SeniorIndependent Director of Barclays, retired from the Board on 30 September 2011. Sir Michael Rake,Chairman of the Board Audit Committee, replaced him as Senior Independent Director with effect from 1October 2011
Marcus Agius Chairman
Age: 65 DateAppointed:
2006 Committees: R, N*, C*
Shares: 232244 Options: 0 LTIP: 0
SeveranceEntitlement
12 months rolling
OtherPositions:
British Broadcasting Corporation (BBC) [SID], Royal Botanic Gardens, Kew [Ch ofTrustees], The Foundation and Friends of the Royal Botanic Gardens, Kew [Ch], BritishBankers’ Association [Ch], UK Trade and Investment [Business Ambassador], TheCityUK[Mem of the Advisory Council], Takeover Panel [Mem], Institut International D’EtudesBancaires [Mem of the Executive Committee], ex-Lazard [Ch, ex-Lazard LLC DepCh], ex-BAA plc [Ch]
Comment: Independent on appointment.
Robert E Diamond Chief Executive
Age: 60 DateAppointed:
2005 Committees:
Shares: 10292671 Options: 472328 LTIP: 8006898
SeveranceEntitlement
12 months rolling
OtherPositions:
Old Vic Productions Plc [Ch], BlackRock, Inc. [NED], Colby College, Waterville, Maine [Chof Board of Trustees], The Mayor’s Fund for London [Trustee], British-American BusinessCouncil [Mem of International Advisory Board], The Council on Foreign Relations [LifeMem], The Atlantic Council [Mem of The International Advisory Board], Judge BusinessSchool, Cambridge University [Mem of the Advisory Board], The Diamond FamilyFoundation [Mem], ex-CS First Boston [VCh, Head of Global Fixed Income and ForeignExchange, Mem of the Executive Board and Operating Committee], ex-Morgan StanleyInternational [MD and Head of Fixed Income Trading]
Comment: LTIP awards refer to share awards under the PSP and ESAS.
Chris Lucas Finance Director
Age: 51 DateAppointed:
2007 Committees:
Shares: 188476 Options: 0 LTIP: 3973065
SeveranceEntitlement
12 months rolling
OtherPositions:
Ex-PricewaterhouseCoopers LLP [UK Head of Financial Services and Global Head ofBanking and Capital Markets, Head of the US Banking Audit Practice]
Comment: LTIP awards refer to share awards under the PSP and ESAS.
Sir Michael Rake Senior Independent Director
Age: 64 DateAppointed:
2008 Committees: A*, N
Shares: 38378 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
BT Group PLC [Ch], easyJet plc [Ch], Financial Reporting Council [Dir], McGraw-HillCompanies [Dir], ex-UK Commission for Employment and Skills [Ch], ex-KPMG [Snrptner], ex-KPMG International [Ch], ex-Business in the Community [Ch]
Comment: Independent by company, independent by PIRC.
David Booth Non-Executive Director
Age: 57 DateAppointed:
2007 Committees: N
Shares: 86806 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
East Ferry Investors, Inc [Dir], Brooklyn Botanic Garden [Trustee], ex-Morgan Stanley &Co [Management Committee, Head of Government Bond Trading, Head of MortgageTrading, Sales and Finance and Head of Global Operations and Technology], ex-DiscountCorporation of New York [Dir]
Comment: Independent by company, independent by PIRC.
Alison Carnwath Non-Executive Director
Age: 59 DateAppointed:
2010 Committees: A, R*, N
Shares: 47742 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
Man Group Plc [SID], Paccar Inc [NED], Land Securities Group PLC [NExCh], ISIS EPLLP [NExCh], CforC Ltd [NED], ex-J Henry Schroder Wagg & Co [Dir], ex-PhoenixSecurities [Snr Ptner], ex-Donaldson, Lufkin & Jenrette [MD, New York].
Comment: Independent by company, independent by PIRC.
Fulvio Conti Non-Executive Director
Age: 64 DateAppointed:
2006 Committees: A
Shares: 52455 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
ENDESA SA [Dir], AON Corporation [Dir], Enel SpA [CEO and Gen Man, ex-CFO], ex-Telecom Italia [ CFO, Gen Man], ex-Ferrovie dello Stato [Gen Man, CFO], ex-Montecatini[Head, accounting, finance, and control department], ex-Montedison-Compart [FD], ex-Mobil Corporation
Comment: Independent by company, independent by PIRC. Failed to attend 2 audit committeemeetings in the year.
Simon Fraser Non-Executive Director
Age: 52 DateAppointed:
2009 Committees: A, R
Shares: 83144 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
Fidelity European Values PLC [Dir], Fidelity Japanese Values PLC [Dir], The MerchantsTrust PLC [Ch], Foreign & Colonial Investment Trust PLC [Dir], ex-Fidelity International[Pres, European and UK Institutional Business, Global CIO, CIO for Asia Pacific and CIO ofthe European Investment Group]
Comment: Independent by company, independent by PIRC.
Reuben Jeffery III Non-Executive Director
Age: 58 Date 2009 Committees:
Appointed:
Shares: 77183 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
Center for Strategic and International Studies, Washington,D.C. [Snr Adviser], Rockefeller &Co. Inc. [CEO], TASC Inc [Mem of the Advisory Board], TowerBrook Capital Partners LP[mem of the Advisory Board], Transatlantic Holdings Inc [Dir], ex-US government [UnderSecretary of State for Economic, Energy and Agricultural Affairs], ex-Commodity FuturesTrading Commission [Ch], ex-Goldman Sachs & Co [Managing Ptnr Paris, Head ofEuropean Financial Institutions Group in London]
Comment: Independent by company, independent by PIRC.
Sir Andrew Likierman Non-Executive Director
Age: 68 DateAppointed:
2004 Committees: A
Shares: 35686 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
National Audit Office [Ch], London Business School [Dean], Institute for Government[Trustee], ex-HM Treasury [MD of Financial Management, Reporting and Audit, Head of theGovernment Accountancy Service], ex-Applied Intellectual Capital Inc [Ch], ex-Bank ofEngland [NED], ex-Tavistock and Portman NHS Trust [NED, VCh], ex-MORI Group [NED,Ch]
Comment: Independent by company, independent by PIRC.
Comment: Independent by company, independent by PIRC.
Sir John Sunderland Non-Executive Director
Age: 66 DateAppointed:
2005 Committees: R, N
Shares: 91187 Options: 0 LTIP: 0
SeveranceEntitlement
OtherPositions:
Merlin Entertainments Group [Ch], Financial Reporting Council [Dir], CVC Capital Partners[Adviser], BUPA [Association Mem], Reading University Council [Governor], AstonUniversity Council [Governor], ex-Cadbury Schweppes PLC [Ch, CE], ex-CharteredManagement Institute [Dep Pres], ex-CBI [Dep Pres], ex-Rank Group PLC [NED]
Comment: Independent by company, independent by PIRC.
1.2 Board Composition (after AGM)
Number % of board
Executive Directors 2 16.67
Independent NEDs 9 75.00
'Connected' NEDs 0 0.00
Other 1 8.33
Women 2 16.67
1.3 Board Committees (after AGM)
Number ofmembers
% indpCo. View
% indpPIRC View
Meetingslast year
Whole Board 12 83.33 83.33 16.00
Audit 5 100.00 100.00 12.00
Remuneration 4 100.00 75.00 11.00
Nomination 5 100.00 80.00 4.00
Number of NED-only meetings in year: n/d
1.4 Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's Shareholder Voting Guidelines. n/d = Not Disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: DIRECTORS ANALYSIS
A. There should be a clear division of responsibilities at the head of the company
a) There is a separate chairman and chief executive Yes
b) The chairman has not previously been chief executive Yes
c) There is a senior independent director Yes
B. The board should contain sufficient numbers of independent non-executives
d) There are at least three non-executives on the board Yes
e) At least a third of the board is independent by PIRC guidelines Yes
f) At least 50% of the board excluding the chairman are independent Yes
C. All directors should be accountable to shareholders by facing regular re-election
g) All directors are required to seek regular re-election Yes
h) All directors face election every year Yes
D. There should be an independent and transparent appointments and review process
i) Nomination committee composition complies with PIRC guidelines Yes
j) Recruitment practices for new directors are transparent Yes
k) There is evidence that a process for succession planning exists and is regularlyreviewed.
Yes
l) Process for regular board and individual appraisals and outcome is disclosed Yes
m) NEDs should annually appraise the chairman's performance Yes
n) Individual director's attendance at board and committee meetings is disclosed Yes
o) There is evidence that training needs for the board are regularly reviewed and actedupon
Yes
1.5 Board Analysis
Comments on principle A
There should be a clear division of responsibilities at the head of the companybetween the running of the board and the executive responsibility for the runningof the company’s business. No one individual should have unfettered powers ofdecision.
There is a clear and robust separation of powers at the head of the company. SirMichael Rake is the new Senior Independent Director. However, the Companydoes not clarify is the Senior Independent Director has powers to add items tothe Board meetings.
Comments on principle B
Non-executives are central to an effective and accountable board structure. Theyshould meet at least once a year without executives present (A.1.3) and theannual report should include reference to the number of such meetings.Shareholders may benefit from non-executives serving on the board who can addvalue whilst not having an outsider’s independent perspective. However, suchappointments need to be assessed as part of the board’s evaluation of its ownrequirements. PIRC places great importance on there being sufficient number ofindependent Non-Executive Directors (NEDs) to be able to effectivelycounterbalance the executive element.
There is an adequate balance between executives and non executives on theboard. The majority of the board, excluding the chairman, is independent byPIRC guidelines. There are 12 board members, namely the Chairman, the ChiefExecutive Officer, the Finance Director, one Senior Independent Director, andeight Non-Executive Directors.
Comments on principle C
The UK Corporate Governance Code requires all directors of FTSE 350companies to be subject to annual election by shareholders. All other directorsshould be subject to election by shareholders at the first AGM after theirappointment, and to re-election thereafter at intervals of no more than threeyears. Non-Executive directors who have served longer than nine years shouldbe subject to annual re-election. However, PIRC do not support the limitedapplication of this provision to FTSE 350 companies and will look to all listedcompanies to hold full elections on an annual basis.
Comments on principle D
It is important that the process of board appointments is fully described, in orderto demonstrate that appointments have been made on merit and againstobjective criteria. Boards should look to provide a balanced, meaningful report,bearing in mind the different skills, knowledge and experience the directors bringto the board. The appraisal process should be described for both nonexecutivesand executives, including the criteria used and minimum requirements set.Appraisals should be undertaken in relation to individual directors, committeesand the board as a whole, and general outcomes should be disclosed. Thedirector or committee responsible for the process should be identified.Companies should consider the appointment of an independent third-party toconduct the review.
In light of Higg’s view concerning the independence of a Chairman, PIRC nolonger considers it acceptable that the board chairman be a member of theNominations Committee. The Chairman's evaluation was carried out by theSenior Independent Director, who sought the views of the other non-executivedirectors.
Total Emoluments 10,388,591.00 188.00 3,600,000.00 14.00 3,154,333.00
Comments on table
"Other performance related" refers to the value of awards made under the Share Value Plan 2011 andBarclays LTIP 2011-2013.
The pension increase is calculated as the increase in transfer value multiplied by a factor of 20, representingan estimate of its capital value.
LTIP Gains include the value of dividend shares released under the PSP and the ESAS (footnote from page61 of the Annual Report). The company has not provided the monetary value of the option gains during theyear.
Comparative salary ranking
Highest paid director: 3rd out of 5
Average executive: 5th out of 5
Comparator used: FTSE 100 Banks
2.2 Executives' incentive bonus structure
Remuneration Advisers:Towers Watson
Scheme Annual Bonus Scheme
Maximum Award 250% of salary
Performance Conditions Performance targets not disclosed.
Comment The directors received deferred share bonuses under the Share Value Plan.
Scheme Executive Share Award Scheme (ESAS) [Bonus award]
MaximumAward
Proportion of the annual bonus at the discretion of the committee (From previous disclosure)
PerformanceConditions
None disclosed. Five year holding period to be certain to obtain bonus award.
Comment Nil cost options are normally granted under mandatory ESAS awards at the third anniversaryof grant and are exercisable (over initial allocation and two-thirds of bonus shares) typically fortwo years. The aggregate exercise price of a nil cost option is £1 but the actual exerciseprices are not disclosed. At the fifth anniversary of the provisional allocation the nil costoptions normally lapse and the shares (including bonus shares) are released at the discretionof the ESAS trustee. Chris Lucas received nil cost options over 43,077 shares.
Scheme Performance Share Plan (PSP)
MaximumAward
Not fully disclosed. Maximum award payout is 3 times value of initial award. Equivalent to2400% of salary of £6m for Bob Diamond.
PerformanceConditions
For cycles 2010-2012 and 2009-2011: 50% TSR and 50% RoRWA over a three year period.TSR 33% of maximum award released for above median performance (6th place) with 100%released in 1st place and a scaled basis in between. RoRWA 17% of maximum awardreleased for 0.83% scaled to a maximum award at 1.46% (increased from 1.34% for 2009cycle).
Comment No shares were awarded under the PSP.
Scheme Share Value Plan
MaximumAward
250% base salary
PerformanceConditions
Deferred annual bonus is awarded in the form of shares under this plan. Awards vest in threeequal portions on each of the first, second and third anniversaries of grant. Other than forcapital contingent awards no further performance conditions apply. If the Award is overShares, an additional benefit may be awarded representing the value of dividends payable onthose Shares that actually vest since the date of grant. In the event of a change in control,reconstruction or winding up of the Company, the Grantor has discretion to determine thetreatment of unvested Awards including allowing the early release of Awards.If a participantdies, the Grantor may allow an Award to vest immediately.
Comment The Barclays Group Share Value Plan (the ‘SVP’) was adopted on 12 March 2010. SVP isused mainly to award Shares in respect of annual incentives. The CEO and Finance Directorreceived bonuses (which is deferred) representing 200% and 250% of the base salariesrespectively.
Scheme Long Term Incentive Plan
MaximumAward
500% salary normally but greater on recruitment
PerformanceConditions
Performance period is 3 years for 50% and 3 years plus one year holding for 50%. Finance60% Primary metric: Average annual Return on Risk Weighted Assets (‘RoRWA’) over 3years. 23% vests for 1% RoRWA growth and max of 60% vests for 1.5%. Secondary metric:Profit Before Tax (‘PBT’) . Committee retains discretion to adjust the percentage of Award upor down by up to 5 vesting percentage points subject to PBT performance. Risk 30% LoanLoss Rate. min vesting of 10% at LLR of 95bps and max vesting of 30% if LLR at or below81bps. Sustainability 10% Metrics to be determined by the Committee, including: employee
opinion survey; relationship with regulators; and customer satisfaction. Malus applies butexact conditions not given. As an example the committee states that awards may be reducedwhere the Committee in its discretion determines that there is evidence of serious employeemisconduct or where a business unit has suffered a material failure of risk management. Aprudent financial control provision also applies. The committee may limit, reduce or addfurther conditions to the vesting of Awards or suspend Awards if the financial health of theGroup has significantly deteriorated over the vesting period. A definition of financialdeterioration has not been given.
Comment The LTIP is intended to replace the Barclays PLC Performance Share Plan and is proposed atthe 2011 AGM.
2.3 Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's Shareholder Voting Guidelines. It is based on disclosure in the report and accounts. n/d = not disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: REMUNERATION ANALYSIS
Executive remuneration should be determined by a formal and independent procedure
1) Remuneration committee membership meets PIRC guidelines No
2) Where remuneration consultants are appointed, a statement should be madeavailable of whether they have any other connections with the company.
Yes
There should be full and transparent disclosure of remuneration
3) Are executive share schemes’ long term performance measures linked to non-financial KPIs?
No
4) Pay elsewhere in the company is considered in determining directors' pay Yes
5) The intended balance of the pay package is fully described Yes
6) Duration of contracts and company liabilities on termination are given Yes
7) Compensation payments or significant changes in policy are fully explained Yes
8) Takeover provisions attached to share schemes disclosed Yes
Longer term incentives should provide rewards scaled towards superior performance
9) Maximum vesting targets are challenging relative to performance required No
10) Minimum vesting targets are challenging relative to performance required No
11) Vesting scales are sufficiently broad and geared towards better performance No
12) There are at least two concurrent performance criteria one of which uses acomparator group or index
Yes
13) Remuneration committee cannot amend share schemes without prior shareholderapproval
No
14) Remuneration committee has no discretion to determine payouts on a takeover No
Remuneration structure as a whole should not be excessive
15) Total potential rewards under all incentive schemes are not excessive No
16) Directors are required to build up a significant shareholding Yes
17) Schemes available to enable all employees to benefit from business success Yes
18) Other remuneration practices do not raise concerns No
19) Performance Period is 5 years or more No
20) If performance period is 4 years or less there is an additional holding period applied No
Contracts policy should balance potential costs to the company with directors' interests
21) No current directors have rolling contracts in excess of one year Yes
22) Contracts do not provide for liquidated damages in excess of one year's salary inany circumstances
No
23) Future bonuses are not taken into account in determining compensation No
2.4 Analysis
Disclosure
Figures
The presentation layout of the Remuneration is convoluted. The report contains 24 different tables, some ofwhich provide duplicate information. We raised the complexity of the Remuneration Report in our previousreport, and the company's failure to provide a more concise and simpler report is disappointing. The mainschemes (which happen to be the most recently approved ones) are well disclosed. However the companyhas outstanding plans (for e.g. the ESAS, PSP and the CCP), most of which are not well described and arementioned in a table or a footnote. In our opinion, this year's Remuneration Report contains less valuableinformation than last year's. Disclosure of outstanding share plan and long term awards is poor. Exactexercise prices for awards are not disclosed and aggregate exercise price for ESAS awards rather thanexact price is disclosed. Weighted average exercise prices are disclosed for other share awards. Numbersshown as aggregate ESAS amounts may also include shares under option as at 31st December 2011.Figures for awards exercised are conflated with figures for awards released.
Policy
Barclays has published a separate report entitled “Barclays approach to Remuneration” which aims toprovide further disclosure of the active plans in use by the company. In this document, the company clearlylays out its policy and the regulatory requirements. While we acknowledge the initiative, the list of plansmentioned therein is not exhaustive. For example, the Executive Share Awards Scheme (ESAS) and theContingent Capital Plan awards (CCP) have not been reported on.
It is noted once again that the Remuneration Committee enjoys considerable discretion with respect toawards. How discretion is exercised and by whom for each of the incentive plans is not clearly explained.Discussion of who exercises discretion over outstanding awards was absent from the 2010 report and hasnot been disclosed in 2011’s report either. Last year’s disclosure showed that the PSP plan rules givediscretion to the trustee over release of awards and over treatment of awards on cessation of employment orchange in control. No discretion given to the remuneration committee. The ESAS was also reported to givediscretion to the trustee over awards and signing on bonuses for recruitment but none to the remunerationcommittee. The PSP and the ESAS have not been detailed this year. The LTIP’s awards (approved byshareholders last year) are also subject to the RemCo’s discretion.
Performance targets
The metrics for 2011-2013 are 60% financial, 30% risk and 10% non financial. Financial measures include 3year average RoRWA. The extent to which the RoRWA measure is adjusted for executives withresponsibility for businesses that are subject to greater risk, for example investment banking against retailbanking, is not clear. Non financial measures include Barclays relationship with its regulator. The linking ofexecutive pay incentives to prudent share capital management is not appropriate in our view. This isparticularly the case in a regulated bank where regulatory requirements are being used to justify incentivepayments.
In addition to the "relationship" with its regulator Barclays uses a financial underpin to determine whetherincentive awards should be reduced which includes Core Tier 1 capital ratio. Previous targets for the Bonusscheme which led to the bonus award of £4.5m to the executive directors were not disclosed. There is alsono adequate discussion to justify this level of award.
Disclosure rating: D
Balance of incentive and reward
Long term incentives
The primary incentive schemes for FY 2011 have been the Barclays LTIP and the Share Value Plan. 60% ofthe award is calibrated against RoRWA and 30% against loan loss rate. 10% of the award for 2011 isdeliverable on satisfaction of criteria which includes customer satisfaction, employee opinion surveys andthe relationship with the regulator. Quantitative targets have not been provided by the bank and as such, it isnot possible to assess that part of the scheme.
Excessiveness
Overall, the annual bonus and the long term incentive plan can potentially pay excessive amounts. Duringthe year under review the CEO was the recipient of very generous awards. The aggregate awards made toBob Diamond amounts to some £11.8m in value, roughly equating to 8.7 times his base salary. His LTIP
gains, resulting from him exercising his vested share awards, amounts to some £13.8m, more than 10 timeshis base salary. We also note the £5.745m tax equalisation paid to Mr Diamond. While the companyadvised that this is not a compensation as such, this amount is hardly justifiable. An argument for highexecutive remuneration is that there is an international market in executives, if that is the case – which iscontestable - then differential tax should already be reflected in the going rate for the job.
Incentive/reward rating: E
Contracts
All executive directors have one year rolling contracts. Termination payments comprise one yearscontractual remuneration, which includes salary, benefits, and pension. For Mr Chris Lucas it also includesa bonus payment (being the average of the previous three years' bonus awards), which is capped at 100% ofsalary. For Mr Diamond the bonus element would be calculated as the average of the three prior years but isuncapped, given that his base salary is relatively low and a small percentage of his total compensation, withbonus being the main element. PIRC considers it inappropriate that such payments include a notional bonuselement.
Contracts rating: D
Overall rating for remuneration report: DED
3 AUDIT & REPORTING
3.1 Auditor's Remuneration
Auditors: PricewaterhouseCoopers LLP
Date appointed:
Audit partner: Andrew Ratcliffe
Responsible since: 01 April 2011
2011 2010 2009
Statutory audit fee 39.00 38.00 35.00
Non-audit work undertaken by the auditors - PIRC category 1
Audit-related, mandatory or regulatory 6.00 3.00 6.00
Tax compliance 5.00 7.00 0.00
Other non-audit work undertaken by the auditors - PIRC category 2
Other tax services 1.00 1.00 7.00
Acquisition-related 0.00 0.00 0.00
Other services 3.00 7.00 4.00
Total non-audit fees (ex. category 1work) 4.00 8.00 11.00
Total PIRC category 2 non-audit aspercent of Statutory audit fee 10.26% 21.05% 31.43%
3.2 Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's shareholder voting guidelines. n/d = not disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: AUDIT ANALYSIS
A. The auditors should be independent of the company and management
a) No directors have a significant connection with the auditors Yes
b) Audit firm is subject to regular fixed-term rotation No
B. Non-audit fees should be disclosed and should not potentially affect independence
c) An adequate breakdown of the nature of non-audit fees is provided Yes
d) Level of non-audit fees do not raise independence concerns No
C. Independent audit committee demonstrates accountability and expertise
e) A fully independent audit committee exists comprising at least three members Yes
f) Audit committee includes at least one member with significant financial experience Yes
g) The audit committee report on its activities complies with PIRC guidelines Yes
h) Audit committee's policy on awarding non-audit work is fully described No
i) The audit committee should review "whistleblowing" arrangements Yes
D. Effective Internal Controls
j) There has been a review of the effectiveness of the internal audit arrangements Yes
k) Absence of internal audit has been reviewed n/a
3.3 Audit and Reporting Analysis
Comments on principle A
PIRC believes there is a risk that over time an auditor’s familiarity with the auditclient’s affairs may result in excessive trust. If the same firm continues to holdthe position of auditor for many years, then previous judgements are not subjectto outside scrutiny. We do not consider that rotation of the audit partner, withinthe same firm, is sufficient. We continue to maintain that rotation of the auditfirm after a period of five years is best practice.
Comments on principle B
Concerning non-audit fees we continue to disagree with the view that audit firmscan be employed to provide consultancy services to the management at thesame time as undertaking a statutory audit on behalf of the shareholders. PIRCfirmly believes that other commercial interests can compromise auditors in theirability to confront directors on difficult issues. We do however operate amateriality threshold for non-audit fees when one of the big four audit companiesare engaged, and only when this threshold is exceeded will we make anassessment as to the excessiveness of non-audit work in relation to audit work.
The non-audit fees incurred during the year under review are £4m. Thisrepresents 10.3% of the audit fees paid. On a three year aggregate, non auditfees are less than 25% of the statutory audit fees.
Comments on principle C
The Code requires that the committee should be provided with sufficientresources, that its activities should be reported in a separate section of thedirectors’ report (within the annual report) and that the chairman of thecommittee should be present to answer questions at the AGM. PIRC believesthat the audit committee’s report is a cornerstone of good governance and thatits approval should become a regular agenda item at the AGM of companies.When constructing the report, the board should be aware of the guidanceprovided in the Smith Report PIRC believes such a report should cover theissues dealt with by the committee in the year under review rather than merelydescribing the duties of the committee.
The committee's policy on award of non-audit work is set out. The Chairman ofthe Committee approves/denies requests for the auditors to conduct non-auditwork above the stated threshold of £100,000. Although the lower threshold fortax related non-audit work is stated it is not clear which categories of work arepre-approved within the £25,000 limit. We would welcome further disclosure onhow many times the approving authority has denied requests by the auditors toconduct non-audit work. The audit committee met 12 times in the year.
Comments on principle D
We consider that, in almost all cases, internal audit functions are appropriate forlisted companies. Boards that have determined such a function is not requiredshould justify their position. A company’s auditors should not undertake internalaudit functions for that company.
4. SHARE CAPITAL & SHAREHOLDER RELATIONS
4.1 AGM Control Structure
Type Nominal Currency Issued (millions) Authorised (millions) Par value
Ordinary shares GBP 12,199.00 n/d 0.25
Limited voting ord shares GBP 0.00 0.00 0.00
Non-voting ord shares GBP 0.00 0.00 0.00
Preference shares GBP 237.42 n/d n/a
Significant changes in issued capital:
4.2 Disclosed Ordinary Shareholdings (at 04 March 2011)
Directors' interests 0.091%
BlackRock, Inc 7.06%
Qatar Holding LLC 6.79%
Nexus Capital Investing Ltd 6.98%
Legal & General Group Plc 3.99%
4.3 Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's shareholder voting guidelines. n/d = not disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: SHAREHOLDERS ANALYSIS
A. Shareholders have an opportunity to vote on dividend policy
a) Declared dividend or policy is put to the vote No
B. Shareholders should have adequate information and access to all directors
b) Sufficient biographical information on all directors is disclosed Yes
c) Justification for new director appointments is provided Yes
d) Meetings between NEDs and shareholders are reported Yes
C. All ordinary shares should have equal rights
e) Each ordinary share has equal voting rights Yes
f) There is no controlling shareholder Yes
g) No persons have the right to designate directors to the board Yes
D. Voting by shareholders should be democratic and transparent
h) All voting is conducted by poll Yes
i) The levels of proxy votes have been disclosed Yes
j) Steps taken in understanding of the views of major shareholders Yes
4.4 Share Capital and Shareholder Relations Analysis
Comments on principle A [TO BE COMPLETED]
Comments on principle B
PIRC believes that shareholders should be prepared to engage with companieswhere they have concerns or where an issue is unclear, in order to convey theiropinions and raise the quality of debate. In the same way, companies shouldwelcome the opportunity to engage with shareholders and prospective investors.
Comments on principle C The Company meets best practice in this regard.
Comments on principle D
companies to undertake business at general meetings. Insertion of a provision incompany Articles mandating poll voting on all resolutions at general meetingswill avoid the need for a chairman to decide on use of his powers to call a poll inthe event that those present at a meeting deciding on a different voting outcometo that suggested by the postal proxy vote.
4.5 Capital Stewardship
NetAssets £m
IntangibleAssets £m
GoodwillCarried £m
GoodwillWritten Off £m
SharePrice £
Total Equity 65196.0
Minority Interest 9607.0
Shareholder Equity 55589.0 2541.0 5305.0 2113.0
Tangible Shareholder Equity 47743.0
Number of Shares 12199.0 1.761
Shareholder Equity perShare 4.56
Shareholder Equity WrittenOff as Goodwill 0.17
Total equity per share including goodwill written off 4.73
Tangible shareholder equityper share 3.91
Premium/(discount) of share price to total shareholder equity per share -61.35%
Premium/(discount) of share price to total shareholder equity per share inclusive ofgoodwill previously written off
-62.77%
Premium/(discount) of share price to total shareholder equity per share less goodwill andintangibles
-55.00%
Tangible assets as a proportion of total invested assets 85.89%
Acquisition losses - goodwill written off as a proportion of share price 9.84%
Commentson CapitalStewardship
Barclays has relatively a low amount of goodwill written-off, indicative that it has not madepoor acquisitions. The business model of a bank is heavily reliant on shareholder value beingdriven by the realisation of the existing balance sheet. Barclays trades at a substantialdiscount (61%) to net book value, indicative of an overvalued book, which IFRS does, and/orbusinesses failing to meet the cost of capital. Adjusting for known IFRS problems thediscount falls to 55%. The share price is so removed from an adequate shareholder return onassets, something must be wrong with the business model and/or the accounting, and/or ageneral lack of confidence in both. Any remuneration scheme, which rewards executiveshaving presided over such a state of affairs can only be regarded as dysfunctional.
5. OPERATING AND FINANCIAL REVIEW OR BUSINESS REVIEW
5.1 Best Practice
This provides our interpretation of compliance with key guidelines on best practice as set out in ASB ReportingStatement: Operating and Financial Review (January 2006). N.B. Only information in the company's OFR orBusiness Review is taken into account below except in interpreting guidelines (vii) and (ix) where informationelsewhere in the annual report is also considered
BEST PRACTICE FRAMEWORK AND CRITERIA: OFR ANALYSIS
A. Overview
i) Does the company have an OFR or Business Review? Yes
ii) Does the OFR/Business Review have a forward-looking orientation? Yes
B. Business Nature, Objectives and Strategies
iii) Does the company explain the market or regulatory environment in which itoperates?
Yes
iv) Does the company explain its objectives and/or strategies? Yes
v) Are the company's objectives and strategies linked to social, environmental or ethical(SEE) matters?
Yes
C. Analysis of Development and Performance
vi) Does the company report main trends and factors affecting performance in the yearunder review AND future prospects?
Yes
vii) Does the company report on risks and uncertainties affecting long-term value? Yes
viii) Does the OFR contain sufficient disclosure of material issues concerningstakeholders (apart from shareholders) that may affect performance?
Yes
D. Key Performance Indicators
ix) Does the company disclose both financial and, where appropriate, non-financial keyperformance indicators in support of its analysis of past and future performance?
Yes
5.2 Analysis
iv) The company's strategy is to deliver superior performance through diversification by business, geographyand funding sources, and relentless focus on customers and clients.
vi) Main trends identified by the company were extreme instability in financial markets. Risk managementforms a later section of the annual report, in conjunction with governance.
vii) The company presents a variety of principle risks and explains in extensive detail the procedures inplace to manage risk.
viii) The company outlines the impact of employees and community and various other stakeholders onbusiness performance. However, we would appreciate increased disclosure in the Business Review over therisks and opportunities associated with its responsible lending practices.
6. CORPORATE SOCIAL RESPONSIBILITY
6.1 Environmental Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's shareholder voting guidelines. n/d = not disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: ENVIRONMENT ANALYSIS
A. There should be a comprehensive, published policy
a) Group-wide environmental policy published Yes
B. There should be clear lines of accountability and management
b) Is there board-level responsibility for environmental issues either in the form of a CRcommittee or a specific director bearing responsibility?
Yes
C. Procedures for stakeholder engagement should be evident
c) Environmental standards required of suppliers Yes
d) Evidence of structured consultation process to gauge stakeholder views Yes
D. Companies should report fully on performance
e) Target setting disclosed Yes
f) Performance evaluated against targets Yes
E. Audits, external standards and independent verification should be used
g) Formal procedures in place for monitoring performance and evaluating outcomes Yes
h) Environmental reporting is externally verified Yes
6.2 Analysis
Comments on principle A
All companies have environmental impacts, and PIRC expects every listedcompany to publish a comprehensive environmental policy. Publishing a policyprovides a clear message both internally and externally. Such policy documentsshould be formal statements describing the group’s approach to dealing withenvironmental issues in its operations.
A good policy statement should acknowledge the board’s responsibilities onenvironmental issues; cover all group companies; include a commitment toappropriate reporting; and set out the board’s objectives in addressing their mainenvironmental impacts, particularly direct and indirect greenhouse gasemissions, energy use, water consumption and waste production.
It is clear from disclosure that such a policy exists.
Comments on principle B There should be clear lines of accountability and management for environmentalissues.
As part of ensuring stakeholder accountability, boards should have a structuredprocess of consultation and engagement to gauge and respond to a variety of
Comments on principle C stakeholder views. Once opinions have been canvassed, they should form partof the review process for policy and objectives
This is the case at Barclays.
Comments on principle D
The company's 2011-2015 Climate Action Programme embraces this approachand sets clear objectives and actions around three priorities:
Managing its own carbon footprint – including a commitment to reduce absolutecarbon emissions by 4% by 2013 and continuing to offset the remainder;
Developing products and services to help enable the transition to a low carboneconomy – including financing and risk management solutions to enable capitalto flow to lower carbon opportunities;
Manage climate change risks – including collaborating with other stakeholdersto manage the risks of climate change to its operations, its clients and tosociety at large.
Comments on principle E Type 2 assurance engagement as defined by AA1000AS (2008) completed byErnst & Young on the 2009 Sustainability Review, and is certified to ISO14001.
6.3 Performance Indicators - Environment
Unit ofmeasurement 2011 2010 2009
KPI inbusinessreview
Target set
a) Greenhouse GasEmissions - Direct
ghg - metricton CO2e
n/d n/d 678746.0 Yes Yes
b) Greenhouse GasEmissions - Indirect
ghg - metricton CO2e
n/d n/d n/d Yes Yes
c) Water Consumption water - m3 n/d 749931.0 14.07 Yes No
d) Landfill landfill - MetricTonnes
n/d n/d n/d Yes No
6.4 Employment Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's shareholder voting guidelines. n/d = not disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: EMPLOYMENT AND HUMAN RIGHTS ANALYSIS
A. There should be a comprehensive, published policy
a) Group-wide employment policy published Yes
b) Health and safety policy published Yes
c) Policy includes a commitment to equal employment opportunities so as toencourage diversity in the workforce
Yes
B. There should be clear lines of accountability and management
d) Board level responsibility for human resource issues identified Yes
C. Procedures for stakeholder engagement should be evident
e) Trade union negotiating framework, works councils or similar strategic-levelprocedures for information and consultation
Yes
f) Company undertakes regular employee satisfaction surveys Yes
D. Companies should report fully on performance
g) Employment performance indicators are disclosed Yes
h) Target setting disclosed No
E. Audits, external standards and independent verification should be used
i) Performance evaluated against targets Yes
6.5 Analysis
Comments on principle A
All companies have employment impacts, and PIRC expects every listedcompany to publish a comprehensive employment policy. Publishing a policyprovides a clear message to both internal and external stakeholders. Suchpolicy documents should be formal statements describing the group’s approachto dealing with employment issues in its operations.
A formal employment policy statement should cover all group companies,acknowledge the board’s responsibilities on employment issues, include acommitment to or evidence of appropriate reporting; and set out the board’sobjectives for addressing their main employment impacts
It is clear from disclosure that such policies exist.
In line with the Davies Review, the company has set itself the aspirational targetof ensuring that at least 20% of its Board is made up of women by the end of2013 and for this position to exceed 25% by the end of 2015.
Comments on principle B There should be clear lines of accountability and management for employmentrelated issues.
Comments on principle CThe company participates in a number of initiatives to promote stakeholderengagement such as focus groups. Detailed information is published in thecompany's Citizenship Report.
Comments on principle DEmployee satisfaction is one of the company's reported KPIs. The companyalso discloses diversity as well as employee age performance indicators. Otherindicators include turnover, resignation and sickness absence rates.
Comments on principle EThe company uses a Group Employee Opinion Survey (EOS) across theorganisation to understand its employees’ views and prioritise managementactions in order to meet employee needs.
6.6 Performance Indicators - Employment
Unit ofmeasurement 2011 2010 2009
KPI inbusinessreview
Target set
a) Workforce Fatalities total fatalities n/d 0.0 n/d No N
b)Company Spending onEmployees' Training
total inmeetingcurrency
n/d n/d n/d Yes N
c) Employee Turnover percent 17.4 16.9 21.0 No N
6.7 Community Investment Best Practice
This table sets out PIRC's assessment of the company's compliance with standards of best practice as set out inPIRC's shareholder voting guidelines. n/d = not disclosed.
BEST PRACTICE PRINCIPLE AND CRITERIA: COMMUNITY INVESTMENT ANALYSIS
A. There should be a comprehensive, published policy
a) Group-wide community policy published Yes
B. There should be clear lines of accountability and management
b) Is there board-level responsibility for community issues either in the form of a CRcommittee or a specific director bearing responsibility?
Yes
C. Procedures for stakeholder engagement should be evident
c) There is evidence that the company is forming partnerships with external bodies Yes
d) There is evidence that the company uses feedback to develop appropriateprocedures
Yes
D. Audits, external standards and independent verification should be used
e) Company reporting is in accordance with GRI or has had external review Yes
6.8 Analysis
Comments on principle A
The company should have a community investment policy in the form of aformal statement outlining the company’s position on community involvement.Such a policy should include identification of the company’s responsibilities tocommunity stakeholders, the role the company plays in wider society and adescription of the company’s charitable and community investment objectives.
The company should demonstrate it has: informed investors of relevantresponsibilities for such issues within the company; established partnerships,where appropriate, with external bodies that may include charities, voluntaryorganisations, trusts, community support groups or local authorities; and set upa reporting framework to ensure that feedback from community stakeholders isused to develop future policy and procedures.
It is clear from disclosure that such a policy exists.
Comments on principle B All companies should evidence clear lines of accountability and management forcommunity related issues
Comments on principle C
As part of ensuring stakeholder accountability, boards should have a structuredprocess of consultation and engagement to gauge and respond to a variety ofstakeholder views. Once opinions have been canvassed, they should form partof the review process for policy and objectives
This is the case at the company. The company has established partnershipswith WWF and SolarAid.
6.9 Performance indicators - Community Investment
Unit ofmeasurement 2011 2010 2009
a) Cash Donations (UK) total in meetingcurrency
52900000.0 n/d 19300000.0
b) Cash Donations (Global) total in meetingcurrency
n/d 55300000.0 n/d
c) Other Company Giving (in kind) total in meetingcurrency
n/d 26700000.0
d) Political Donations (Europe) total in meetingcurrency
n/d 0.0 0.0
e) Political Donations (outside EU) total in meetingcurrency
224158.0 123295.0 213982.0
APPENDIX: COMPLIANCE WITH COMBINED CODE OF BEST PRACTICE 2006
Under the listing rules, UK companies are required to make the following disclosures. This table is PIRC'sassessment of the company's statements.
Listing rule compliance
ListingRule
a) There is a statement of how the company has applied the Combined Code'sprinciples
Yes
b) There is a compliance statement; specifying the code provisions with which thecompany has not complied, if any.
Yes
c) The board considers that the company complied with the code in full for the wholeperiod
Yes
d) Is combined code compliance statement complete? Yes
Information is believed to be correct but cannot be guaranteed. Opinions andrecommendations constitute our judgement as of this date and are subject tochange without notice. The document is not intended as an offer, solicitation oradvice to buy or sell securities. Clients of Pensions & Investment ResearchConsultants Ltd may have a position or engage in transaction in any of thesecurities mentioned.
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