Salz Review - Wall Street Journal

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103 Salz Review An Independent Review of Barclays’ Business Practices which different views are seen as constructive and are encouraged (even if sometimes mistaken), where disciplined but rigorous challenge on significant issues is regarded as acceptable. The culture and style of the board is a core continuing responsibility of the Chairman, supported by the Senior Independent Director or the Deputy Chairman. 9.21 Some of our interviewees told us that the challenge process was not as effective as they would have liked. Most were complimentary that the Board remained levelheaded during times of pressure and that people were able to raise their concerns one way or another. 9.22 Board members at other companies mentioned the importance of reserving board time for free-form discussion of key issues, to understand emerging or future risks (sometimes referred to as ‘horizon scanning’) across the Group as a whole. Barclays did have informal sessions, for example over dinner the night before their normal scheduled Board meetings. Nevertheless, some suggested that it would help to have time at the end of the agenda, sometimes without executives, to discuss how a particular meeting had gone while still fresh in directors’ minds. There are practical problems with having these discussions at the end of meetings, but if this time is not planned into the timetable, there is a risk that such discussions will be crowded out by what is seen as urgent. 9.23 We agree with the Walker Review in acknowledging that “while a majority of NEDs should be expected to bring materially relevant financial experience (…), there will still be scope and need for diversity in skillsets and different types of skillset and experience (…). A [bank] board should not be over-specialised and should be able to draw on a broad range of skills and experience. These generic skills should ideally include perspective, insight and confidence in distinguishing between major issues for the board and important but lesser issues that, if unchecked, can crowd out and distract from board focus on the larger issues; a readiness where necessary to challenge the executive and other NEDs in debates on major issues where a strategic proposition from the executive or emerging conventional wisdom may require close scrutiny; and experience relevant to assessing the performance of the CEO and senior executive team.” 178 9.24 The chart below (see Figure 9.1) shows the extent of banking and/or financial experience among Barclays’ non-executives at five-year intervals from 2002 to 2012. It illustrates that Barclays has now exceeded its 50% target for non-executive directors with banking and/or financial experience. Ideally, this group should also reflect Barclays’ particular activities. We regard first-hand experience of senior positions in bank risk or compliance functions or in regulation as particularly useful, as well as experience of some of the more complex investment banking businesses. We also believe that diversity of experience, and gender diversity, are essential to avoid ‘groupthink’. It is disappointing that only one of five female non-executives between 2002 and 2012 has completed two terms as a director. 178 Ibid., p. 45.
Salz Review An Independent Review of Barclays’ Business Practices 104 Figure 9.1 – Banking and Financial Expertise of Barclays NEDs (2002-12) No. of Non Executive Directors 12 10 8 6 4 2 0 9 5 3 1 0 December 2002 11 4 3 3 1 December 2007 10 1 5 4 0 December 2012 Expertise: Little bank or financial Other financial Investment bank (including advisory) Retail bank Notes: CFO roles, and NED roles at financial institutions included in Other Financial (e.g., Woolwich NEDs) Recommendation 7: Board experience Barclays should include among its Non-Executive Directors a sufficient number with directly relevant banking expertise. This will help the Board to challenge effectively the performance of management, to satisfy itself that risk management systems are robust, and to test business practices. It is essential that the Board includes appropriate diversity of experience, without causing it to be excessively large. 9.25 It is for the Chairman to ensure that all directors have the opportunity to make a contribution to matters coming before the Board and for individual directors to invest time in developing their familiarity with the Group businesses. All nonexecutives should take time, outside the formal induction process, to visit operations and develop experience of senior executives. This will be especially important for those directors who have a particular contribution to make to Board discussions through non-financial services experience (such as in retail or technology) but who have less familiarity with aspects of Barclays business. 9.26 We consider it important that non-executives invest time in getting to know the members of the Group ExCo and some tiers of management below Group ExCo level. This brings multiple benefits. Among other things, it gives the opportunity to: ― Develop views on how effectively management ‘lives’ the bank’s values; ― Assess the quality of people in various important roles and to evaluate the operation of ExCo; ― Assess the quality of control functions and their independence; and ― Assess the quality of the management of the risks that the Group runs. In addition, this should give the Board more opportunity to engage on staff and customer satisfaction issues in particular business units.
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Salz Review - April 2013
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Salz Review - Wall Street Journal

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