Salz Review - Wall Street Journal

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109 Salz Review An Independent Review of Barclays’ Business Practices 9.45 In our view, for much of the period under review, the Barclays executive team included strong leaders but was not cohesive as a whole, relying heavily on individual accountability for ‘cluster’ or business unit performance and not enough on collective responsibility for the success of the Group as a whole. 9.46 The Barclays Group Chief Executive chairs the Group ExCo, which has a wideranging remit to “assist the Barclays Chief Executive in carrying out his duties, and act on issues of Barclays wide concern”. 183 The decision-making power vests in the Chief Executive, not in the ExCo. We consider that, however it is constituted, its role for the success of the Group as a whole should be made clear. The executive team should challenge and debate Group issues. Similar considerations apply to the ExCos at business unit level in the Group. 9.47 As at 31 December 2003, the Group ExCo comprised 11 people including the Chief Risk Officer (CRO), Chief Operating Officer (COO) and Chief Administrative Officer (CAO), together with business unit leaders. A year later this had reduced to seven, with the departure from the committee of the CRO and CAO and two business unit leaders. 9.48 For a key period in the run-up to and during the financial crisis (2006 to 2009), the membership of ExCo was kept relatively small (four to six people), at times including only John Varley as the Group Chief Executive, the Chief Finance Officer and the two ‘cluster’ Chief Executives. At that time, ExCo had no direct representation from smaller business units, or from functions such as Group Risk, Compliance, Legal or HR. The cluster arrangement was based on a decentralised system of accountability with a powerful leader for each of the ‘clusters’. While intended by John Varley to avoid silos, it did not develop a cohesive team at the top of the organisation or lead to the right kind of debate and challenge – members had little incentive to challenge each other. Leaders of particular business units may be reluctant to challenge and debate the plans of other business units, to avoid provoking such challenge and debate in relation to their own. We would suggest that a bigger ExCo, led on a cohesive basis with sufficient debate and challenge across the businesses, would have led in this period to a materially better sense of teamwork across the Group, better integration of the Group Centre with the business units, and stronger engagement of the control functions. If so, this might well have improved decision making. 9.49 When Frits Seegers left Barclays in November 2009, John Varley broadened ExCo’s membership to add five leaders of businesses: Antony Jenkins running Global Retail Banking; Jerry del Missier and Rich Ricci as Co-Chief Executives of Corporate and Investment Banking; Tom Kalaris, Chief Executive of Barclays Wealth; and Absa Chief Executive Maria Ramos. From the control functions, he added Mark Harding as Group General Counsel (also responsible for Compliance), Robert Le Blanc as Group CRO and Cathy Turner as Group HR Director. Interviewees have remarked that the wider membership of 11 people from November 2009 was more effective. Antony Jenkins has since gone further in adding to ExCo Ashok Vaswani as Chief Executive of UK Retail & Business Banking, and Valerie Soranno-Keating as CEO 183 Group Executive Committee Terms of Reference.
Salz Review An Independent Review of Barclays’ Business Practices 110 of Barclaycard, in addition to Sir Hector Sants as Head of Compliance, and Shaygan Kheradpir as Chief Operations and Technology Officer. 9.50 Particular consideration should be paid to ensuring that the CRO and Head of Compliance have the status among senior leaders so that their views are adequately taken into account. The primary responsibility for this must rest with the Group Chief Executive. The presence of control function leaders in the Group ExCo and in similar ExCos at business unit level will typically help to achieve a wider focus from all participants. The ExCo Chairmen at business unit level have an important role in ensuring that their ExCo is a meaningful part of the Group governance structure, with responsibilities for the overall Group’s success. The Chairman’s role in leading an ExCo should be reflected in his performance review and, as regards the Group ExCo, the Barclays Board should extend the annual Board evaluations to cover its oversight of the Group ExCo’s effectiveness. 9.51 In making these suggestions we are less concerned about the formal governance framework for the executive team. Some organisations prefer an ExCo with collective decision rights; others, including the Barclays Group ExCo, reserve decision making for the Chief Executive. Some Chief Executives may prefer to have different groups of executives for Group Centre issues than for operational business issues. What matters is that the leadership group, and the Chief Executive in particular, is truly open to challenge and debate, that the right people are included in those debates, and that the team develops consistency in the management of the Group. Recommendation 10: Cohesive executive team The Group Chief Executive should be responsible for building a cohesive senior executive team which actively contributes to decision making through open debate and challenge. This should be reflected in his performance reviews and in the performance reviews of the senior executive team. The Board should regularly review the effectiveness of the senior executive team. Group Chief Executive Succession Planning 9.52 The board has a primary role in choosing the chief executive. For as long as it has confidence in that chief executive and his team, it will tend to support him, while challenging particular proposals and regularly reviewing performance. Getting the appointment of the chief executive right is therefore very important, and so is the board’s process of developing succession plans in advance of any appointment. Done well, succession processes identify the skills and capabilities needed for the success of the organisation well ahead of a possible appointment, enable long-term development of future leaders internally and identify possible candidates externally at an early stage. For a universal bank like Barclays, it involves choosing the best person available in the world. 9.53 In making its choice of Group Chief Executive, the Barclays Board should be mindful not just of the quality of candidates as individuals and their track records,
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Salz Review - April 2013
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