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Who is leading Barclays Bank?
The extraordinary leadership crisis at the bank, bought about by public revelations of its role in manipulating inter-bank interest rates, has cost the bank its top leadership.
On Monday the bank’s chairman, Marcus Agius, resigned in what was reportedly an effort to save the job of Barclay’s CEO, Bob Diamond, who has had a 15-year career with the bank.
Yesterday, Diamond resigned anyway, and the company’s chief operating officer, Jerry del Missier, followed as the scandal unfolded minute by minute.
Astonishingly, Agius then returned as chairman, full-time, to lead the headless company and the search for a new CEO.
It’s the kind of panicky sequence of events that suggest Barclays has no plan, says crisis management consultant, Andres Puig. “With organisations the size of Barclays, you would think and hope that there would be a disaster management plan that anticipates a whole series of scenarios in which the top echelon of management were suddenly not available,” he tells LeadingCompany today. “But there has been this panic and everyone has resigned.”
Barclays stands accused of manipulating the Libor (London inter-bank offered rate), which is the interest rate that banks charge each other, following an investigation by the British Financial Services Authority.
The Libor is seen as a measure of economic health in Europe.
In Australia it is called the Bank Bill Swap Rate and it is calculated on the rate that banks charge each other.
In Europe, Libor is calculated on trust. Each day, Thomson Reuters calculates the rate on behalf of the British Bankers Association, as Business Spectator explains. “Groups of banks on 10 currency panels are asked: “At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11am?” I kid you not,” writes Alan Kohler today.
Barclays is suspected of lying about the rate at which it could borrow funds, and has been fined $451 million by the FSA following its investigation.
Barclays defended its position, saying that the bank is doing what it has always done with the implicit approval of the regulators, says Puig. “Now because of the antipathy of the public and politicians against banks, they are having to defend it.”
The issue is one of trust says Dr Walter Jarvis, a lecturer in management practice at the University of Technology, Sydney (UTS). “The Libor stands for trust,” he tells LeadingCompany. “It is a question of character. At the risk of being simplistic, integrity is doing what is right and naming what is wrong.”
But Barclays has folded its hand on the issue of trust.
“They may have jumped the gun,” says Puig. “Instead of continuing to argue the case for what they have done and working out a strategy with regulators for resolving that, they have engaged in these resignations.
“The fact that the chairman has had to come back tells us they have cut too far, too quickly,” Puig says. “They are now on life support.”
Brian Gardner, general manager of career management consultants, The Donington Group, says the board will immediately turn to interim executive recruiters for someone to step into the breach.
It is quite usual for a director – in Barclays’ case, chair Marcus – to step into the shoes of a suddenly departing CEO, Gardner says.
Gardner says the resignation of the COO suggest the board believes the situation of its leaders is untenable. “It looks as if there is a progression of discussions, which indicates the board is across the issues.”
However, Puig says history shows that when chairs step into leadership roles, it is often an “unmitigated disaster”. The roles are too different, with the CEO focused on operations and the chair on corporate governance.
The challenge for the bank now is to rebuild the trust of its clients, investors and employees, says Jarvis. “The main idea behind restoring trust is that it has to be earned. The last thing they need to be doing is pumping out public relations statements. They have to genuinely demonstrate they can be trusted, and it will take time – years.”
How can they do it? “By not putting shareholder value first and foremost, and making everything else secondary,” Jarvis says.
Says Puig: “The key thing now is who takes over the helm. What they need to do is bring in a CEO as quickly as possible so everyone can heave a sigh of relief. That person is calm, able to deal with inquiries, and with all the public facets. it is difficult to find a person like that, with sufficient gravitas to see this situation through.”
Gardner says Barclays may find a new CEO quickly if the bank looks in the right places. An interim executive recruiter might have someone ready to step into a permanent position. An internal appointment from the board or executive ranks is possible. In particular, an internal hire could step into the COO role, without it being called COO, while the bank focuses on the top leadership positions.
Barclays’ new broom must be a “Nelson Mandela” of banking, Jarvis says, referring to the integrity of South Africa’s first black president. “Whoever they put in will have to have a track record – a proven one – about having won the trust of everyone in the banking industry. They will not necessarily be eloquent and charismatic.”
“The problem is the board will say we need a fluent speaker. They will go for charisma, and that is not the issue. It is character.”