"Uncomfortable reading": 7 key extracts from the Salz report into Barclays' culture

"A few investment bankers seemed to lose a sense of proportion and humility".

The Salz Review-  a report into Barclays' cultural shortcomings post libor scandal - makes for "uncomfortable reading", according to the bank's current CEO. He's not wrong. Here are some key extracts (emphasis mine throughout):

The report suggests that if there were company values at Barclays, no-one knew about them:

We believe that the business practices for which Barclays has rightly been criticised were shaped predominantly by its cultures, which rested on uncertain foundations. There was no sense of common purpose in a group that had grown and diversified significantly in less than two decades. And across the whole bank, there were no clearly articulated and understood shared valuesso there could hardly be much consensus among employees as to what the values were and what should guide everyday behaviours. And as a result there was no consistency to the development of a desired culture.

HR wasn't given enough power:

At Barclays, HR at times appears to have been seen more as an administrative function required to satisfy business needs. Although Bob Diamond, on becoming President, also took on responsibility for Group Talent, the heads of HR were typically on neither the Group nor divisional Executive Committees. HR appears accordingly to have found it difficult to exercise an appropriate level of challenge to the businesses on some people-related issues. Heads of HR were not given the authority to push sufficiently for the heads of business units to reflect desired behaviours in a variety of matters, such as promotion decisions, performance reviews, or remuneration. Given the decentralised model, it was especially difficult for the Group Head of HR to have appropriate influence within the investment bank.

The law wasn't given enough power:

The institutional cleverness ... stretched relationships with regulators and resulted in them and the market questioning some of Barclays’ financial information. Barclays was sometimes perceived as being within the letter of the law but not within its spirit.

Cash > people:

At Barclays, pay was emphasised above any other aspect of people management (see Section 11). In addition, rather than being seen as a means of driving culture, people management was considered predominantly as a tool to increase business performance. Moreover, the people management processes seemed to us to be loosely linked, resulting in different, and sometimes conflicting, messages.

And maybe paying investment bankers too much had turned them all into bastards:

Most but not all of the pay issues concern the investment bank. To some extent, they reflect the inevitable consequences of determinedly building that business – by hiring the best talent in a highly competitive international market (and during a bubble period) – into one of the leading investment banks in the world. The levels of pay (except at the most senior levels) were generally a response to the market. Nevertheless, based on our interviews, we could not avoid concluding that pay contributed significantly to a sense among a few that they were somehow unaffected by the ordinary rules. A few investment bankers seemed to lose a sense of proportion and humility.

..or was it that paying investment bankers too much had merely attracted bastards?

Elevated pay levels inevitably distort culture, tending to attract people who measure their personal success principally on compensation. Our review indicates that this was the case in the investment bank, with many interviewees reporting a sense of an entitlement culture.

Well whichever it was, this doesn't reflect well on the bank’s top 70 executives, who were paid, according to the report  “consistently and significantly above the median compared to peer banks”.

The report concludes:

If Barclays is to achieve a material improvement in its reputation, it will need to continue to make changes to its top levels of pay so as to reflect talent and contribution more realistically, and in ways that mean something to the general public.

Photograph: Getty Images

Martha Gill writes the weekly Irrational Animals column. You can follow her on Twitter here: @Martha_Gill.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.