Item 2: Approve the Remuneration Report
As a result of the investigation into the CEOns conduct in trying to identify a whistleblower, discussed further in item 13, the FCA and PRA each fined Staley 10% of his total remuneration, which was reduced to GBP 917,800 after he agreed to settle at an early stage of investigation. The Company also reduced his remuneration by using the malus clause on his 2016 variable remuneration, which deducted an additional GBP 500,000.
In general, the structure of remuneration is unacceptable. The quantum is considered excessive due to the use of fixed compensation, which has been implemented in order to circumvent the bonus cap imposed upon the banking industry as introduced in 2014 by the CRD IV directive. Incentive pay is considered excessive and setting STI and LTI limits as a percentage of fixed pay now make it effectively a higher total compensation. There is a strong overlap between the performance criteria used for the STI and the LTI.
We recommend shareholders oppose.
Item 13: Re-elect the CEO
Mr. James Staley was investigated by the Financial Conduct Authority (FCA) over allegations that he spearheaded an effort to unmask the identity of a whistle-blower who had raised concerns in an anonymous letter over the hiring of Tim Main, a former colleague of the CEO while he was at JP Morgan.
The bank concluded in its internal investigation that the CEO honestly, but mistakenly, believed that his actions were permitted. In May 2018, the FCA found that his actions breached the Individual Conduct Rule 2 (requirement to act with due skill, care and diligence). The New York Department of Financial Services (NYDFS) and the Federal Reserve Bank of New York conducted separate investigations following which they imposed a $15m civil penalty on Barclays Bank PLC for failings in its whistleblowing program. All regulatory investigations relating to these events are now concluded.
Shareholders should be able to expect without any level of doubt that the CEO will undertake the role with the utmost of due skills, care and diligence. Mr. Staley's behaviour toward a whistleblower, which is an essential function serving in part to protect shareholders from risks, raises concerns over his suitability for the role. We recommend shareholders oppose.
Item 24: Shareholder proposal: To elect as a director, Edward BramsonTwelve years after the beginning of the 2007-2008 crisis, Barclays is still a laggard with its stock price standing at one-third of its April 2007 value. The bank fared as one of the worst performer in the European Banking Authorityns EU-wide stress tests of November 2018, with a fully-loaded CT1 ratio at 6.00% (vs. 13.2% at FYE 2018) and a fully-loaded leverage ratio at 2.88% (vs. 4.5% for the UK alone at FYE 2018) in the Adverse Scenario for 2019. Barclays has not covered its cost of equity (COE) since 2010 and has a Return on Equity (ROE) below its COE. Its 2018 ROE stood at a minimal 2.6% and is projected by bank analysts at c.7% in the next three years, which compares to a COE that currently stands at c.11%. The boardns main arguments against Mr. Bramsonns candidacy do not convince us as the board seems to request again more time to do the samederrors. Having raised the suitability of Mr. Staley in his role as CEO in item 13, we note that the board does not share our concerns, nor has a sense of urgency in tackling long term strategic issues about the bank profitability and shareholder returns. Mr. Bramson could contribute some well-needed and long-awaited revitalization to the board. We therefore recommend shareholders to approve.
Barclays is a holding company. Through its subsidiaries, Co. is a financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. Co.'s business segments are: Barclays U.K, which provides everyday products and services to retail customers and small to medium sized enterprises; Barclays International, which delivers products and services designed for Co.'s corporate, wholesale and international banking clients; and Head Office, which comprises head office and central support functions (including treasury) and businesses in transition.
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ITEM 10: Benoit Bazin was designated Deputy CEO as of 1 January 2019. The company proposes therefore to approve its 2019 remuneration policy, as well as its post-employments benefits. Overall, his remuneration policy structure is more in line with our recommendations and amounts at stake are more moderate than the CEO’s. Thus we support it. Regarding his post-employments benefits, his severance indemnity and non-compete clause do not respect our Guidelines. However, his supplementary pension plan does. Thus, we support Item 12.
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