Salz Review - Wall Street Journal

113
Salz Review
An Independent Review of Barclays’ Business Practices
9.59 Some form of subsidiary Board governance is likely to be required by law in the
UK in the future. The Financial Services (Banking Reform) Bill as currently proposed
would impose a requirement for independent non-executive directors on the board
(or equivalent management bodies) of ring-fenced banks, and the ring-fenced
subsidiary bank will have to be “able to take decisions independently of other
members of its group”. 185 The exact structure of the ring-fence is being left to
secondary legislation. Accordingly, the industry awaits further clarification on how
ring-fenced governance will be implemented in practice. We believe it is essential
that issues of Board responsibility at Group and subsidiary ring-fence level, such
as described in the previous paragraph, be clarified. This includes the legal
responsibilities of the various directors. Without clarification, there may be concerns
about conflicts, such as to the inconsistent accountability of subsidiary directors
on the one hand to the parent as its owner, and on the other for the ring-fence.
The implications of ring-fencing for the Group’s overall operating model are
considered briefly in Section 12.
Culture and Values
9.60 The Group of Thirty has highlighted certain values – including honesty, integrity,
independence of thought, openness/transparency and the courage to speak out and
act – as the ‘bedrock values’ of corporate governance. They go on to argue that: “It is
for the board of directors to articulate and senior executives to promote a culture
that embeds these values from the top to the bottom of the entity…. Wellfunctioning
boards set, promulgate, and embed these values, commonly in the form
of a code, so that directors, senior executives and all other employees in an entity are
fully aware of the standards of behaviour that are expected of them.” 186
9.61 A board oversees how effectively management promotes and embeds its stated
values. So the board must consider the tone it sets; and it should dedicate sufficient
board and board committee time both to discuss how well culture and values are
being implemented internally and how they are being received externally.
9.62 Some interviewees observed, and our analysis of relevant minutes confirms, that the
Barclays Board did not give as much attention to the culture, values and business
practices developing in the Group as, with the benefit of hindsight, these matters are
now recognised to deserve. An exception to this was consideration given at the time
of the Lehman transaction and afterwards to the challenges of integrating
different cultures.
9.63 Bob Diamond, when he became Group Chief Executive, set about building a more
integrated Group with a stronger accountability to the Group Centre, under the
heading ‘One Barclays’. A One Barclays presentation, prepared in 2011, supported
the benefits of a Group-wide culture and mind-set. In November 2011, the Board’s
responsibilities were altered to include promotion of the Group’s purpose, values,
cultures and behaviours, presumably as a response to the reputational issues that
185 Financial Service (Banking Reform) Bill 2012-13, pp. 7-8; http://www.publications.parliament.uk/pa/
bills/cbill/2012-2013/0130/2013130.pdf.
186 Group of Thirty, Towards Effective Governance of Financial Institutions, 2012, p. 25.