Salz Review - Wall Street Journal

7
Salz Review
An Independent Review of Barclays’ Business Practices
everyday behaviours. And as a result there was no consistency to the development of
a desired culture.
2.16 However, culture exists regardless. If left to its own devices, it shapes itself, with the
inherent risk that behaviours will not be those desired. Employees will work out for
themselves what is valued by the leaders to whom they report. The developing
cultures across Barclays were still less consistent as a result of a highly decentralised
business model, that tended to give rise to silos. This left a cultural ambiguity at the
heart of the bank.
2.17 Successfully navigating the financial crisis and all its challenges may have combined
to amplify some particular cultural characteristics. The struggle for survival,
independent of government, dominated its activities. This led to a ‘backs against the
wall’ mentality and a strong drive to win, “winning” being an evident part of the
investment bank’s culture. The management team and the Board had to work hard to
pass the regulator’s capital stress tests. Many suspected that they would fail. The
crisis also offered a special opportunity to have a truly credible US investment
banking capability. And so Barclays acquired parts of Lehman Brothers in the US.
This added a significant integration challenge.
2.18 The institutional cleverness, taken with its edginess and a strong desire to win
(particularly in the investment bank), made Barclays a difficult organisation for
stakeholders to engage with, especially where those stakeholders were themselves
dealing with unprecedented issues. It stretched relationships with regulators and
resulted in them and the market questioning some of Barclays’ financial information,
especially its valuations of illiquid assets, and its control systems. Barclays was
sometimes perceived as being within the letter of the law but not within its spirit.
2.19 Other characteristics added to the risk of less than ideal outcomes. There was an
over-emphasis on short-term financial performance, reinforced by remuneration
systems that tended to reward revenue generation rather than serving the interests of
customers and clients. There was also in some parts of the Group a sense that senior
management did not want to hear bad news and that employees should be capable of
solving problems. This contributed to a reluctance to escalate issues of concern.
2.20 Transforming the culture will require a new sense of purpose beyond the need to
perform financially. It will require establishing shared values, supported by a code of
conduct, that create a foundation for improving behaviours while accommodating
the particular characteristics of the bank’s different businesses. It will require a public
commitment, with clear milestones and regular reporting on progress. It will require
Barclays to listen to stakeholders, serve its customers and clients well get on with the
work to implement its plans and stay out of trouble. The complexity of Barclays’
businesses makes this a particular challenge for its leaders. It will take time before
it is clear that sustainable change is being achieved.