Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
118
9.78 Improved transparency in the disclosure of RWAs, as well as the performance of
individual units within the investment banking business, were regularly among the
top reporting priorities identified during our conversations with Barclays
shareholders. Given the past level of narrative and quantitative disclosure on the
investment bank, it is not surprising that many shareholders felt unable to take a
view on the underlying quality of investment bank earnings.
9.79 The answer is not simply additional disclosure. Indeed Barclays, in line with other
major UK lenders, provided the extra information set out in the British Bankers
Association Code for Financial Disclosure. We suggest that the following are all
important to good communications: (a) enhancing the quality of narrative disclosure,
(b) offering a balanced, candid assessment of performance and prospects, and (c)
integrating the explanation of risks more fully with overall strategy, objectives and
results. And, reflecting the Group Chief Executive’s identification of Barclays’
purpose, we suggest that the annual report should be framed in the context of that
purpose and report on the successes and challenges in fulfilling it.
9.80 There are examples where Barclays has set a standard for openness. For example,
Barclays’ Audit Committee disclosure since 2009 has included a substantive
discussion of specific issues, actions and conclusions drawn. More still is expected in
this area following the Financial Reporting Council (FRC)’s new Guidance on Audit
Committees released in 2012.
9.81 Barclays’ major institutional shareholders are a diverse group, with differing levels of
interest when it comes to matters of corporate governance. The Kay Review of UK
Equity Markets emphasises the choice shareholders have between exit (the sale of
shares) and voice (the exchange of views with the company) as a means of
communicating concerns to management of a company (and the bias towards exit in
markets today). 195 Many of the Barclays’ shareholders we interviewed were passive
funds investing in line with an index and therefore had no exit option for their
Barclays shares – and accordingly had every incentive to maintain a high quality
dialogue with Barclays. On the other hand Barclays’ overseas shareholders tend to
engage less on governance matters.
9.82 We have noted that Antony Jenkins and Sir David Walker have demonstrated their
willingness to listen to shareholders’ concerns and engage with them constructively.
The reaction to this among shareholders we interviewed was extremely positive.
Barclays must ensure that listening to shareholders is not a one-off effort, but part of
a long-term strategy to improve transparency and build confidence and trust. While
much of the engagement will be led by the Executive Directors, it should be
overseen by the Chairman, assisted by the Senior Independent Director.
9.83 Several leading FTSE 100 businesses schedule annual ‘governance days’ where the
Chairman and Board Committee Chairmen meet with their company’s top 30
shareholders. One financial institution has included major institutional shareholders
in a working party to redesign its remuneration architecture. Another bank publishes
its Shareholder Communications Policy, explicitly linked to corporate values, which
195 John Kay, The Kay Review of UK Equity Markets and Long-term Decision Making, July 2012, p.10.