Salz Review - Wall Street Journal

105
Salz Review
An Independent Review of Barclays’ Business Practices
9.27 Greater non-executive engagement at a business unit level should also improve the
Board’s ability to take a longer-term view of senior executive succession, building a
picture of the potential of candidates one or two tiers below the Chief
Executive level.
9.28 Barclays’ directors did recognise the importance of investing time outside Board
meetings to develop their understanding of the businesses and the people. However,
the demands placed on Board time will have made this difficult to accommodate.
9.29 Barclays has a continuing training programme for non-executives which, since 2010,
has included detailed sessions on specific specialist topics, for instance, derivatives,
risk-weighted assets, long-term incentive plans and conduct and operational risk.
These continuing initiatives are important in assisting non-executives’ understanding
of key issues so that they can participate confidently in Board discussions.
9.30 We have considered examples of Board challenge in areas that have given rise to
concern. This has been with the benefit of hindsight and, more importantly, without
having been there at the time. Our judgments are therefore more illustrative of issues
than definitive. There is a common view that Barclays’ management were at times
inclined to focus too narrowly on whether a proposed action met the applicable
rules, without exploring wider implications such as how that decision might look to
shareholders, customers, regulators and the public. In some cases this has resulted in
reputational damage – and a loss of ‘reputational resilience’. The Protium transaction
is an example of a decision where considerable care was taken, including by members
of the Board, as to compliance with relevant accounting rules. This was not a
straightforward decision and much non-executive time was given to it, including as
to reputational aspects. Nevertheless, with hindsight, the Board did not anticipate the
degree of adverse reaction and scepticism that resulted, taking undue reassurance
from the absence of regulatory objection, which was itself quite nuanced.
9.31 It also seems to us that at times the Board might have given greater challenge to
management assurances, for example that issues were ‘industry issues’ or known to
the regulators. Such assurances were no doubt given in good faith – but they did not
always turn out to be a reasonable basis for not taking more urgent action. This
would seem to be the case on PPI, which, although both an industry problem and
known to regulators, seems to have taken too long to be fully confronted.
9.32 Another test of the Board’s effectiveness is how management responds to Board
guidance. In one instance we reviewed, involving a serious breach of a limit in the
investment bank, Board members thought they had sent a clear message to
management that the seriousness of the matter required disciplinary consequences.
In the event, the Board’s expectations were not fully met, although the Board did
initiate a process to check that there were no similar problems with limit
adherence elsewhere.
Time Expectations
9.33 It is essential that non-executive directors’ expectations of the time they are required
to spend are realistic. Otherwise there are risks that they will be unable to find the