Salz Review - Wall Street Journal

9
Salz Review
An Independent Review of Barclays’ Business Practices
training). And there was too much emphasis on financial performance in recruiting,
performance evaluation and promotion, with insufficient focus on values and
behaviours.
2.26 The HR role needs to be strengthened, as does the general approach to people and
performance management, in order to ensure that Barclays gets the very best out of
its undoubtedly clever and highly motivated people, and that the people themselves
benefit from a broader approach to the recognition of their work.
2.27 Our recommendations on the important issues relating to pay are set out in
Section 11. We should point out that very many Barclays’ staff are paid moderately
and have minimal or moderate bonus incentives. It is unfortunate that the high
bonus awards to a relatively small group of people indiscriminately impact the public
perceptions of all bankers and bank employees in general.
2.28 Having said that, Barclays has struggled to deal with pay in a way that reflects a
reasonable balance between the interests of shareholders on one hand, and those of
executives and employees on the other. The structuring of pay was typically focused
on revenues and not on other aspects of performance. Encouraging the
maximisation of short-term revenues carried risks of unsatisfactory behaviour, with
significant and adverse reputational consequences for the bank. The principal issues
we have identified include high bonus awards in the investment bank which were
incapable of justification to many stakeholders – especially since the beginning of the
crisis; actions that maximised current year bonuses rather than consideration of
sustainable profitability; and, in the retail bank and Barclaycard, sales incentives that
risked products being sold to customers whether or not suitable for them. Overall,
the pay structures gave the message to staff that the bank valued revenue over
customer service.
2.29 Most but not all of the pay issues concern the investment bank. To some extent, they
reflect the inevitable consequences of determinedly building that business – by hiring
the best talent in a highly competitive international market (and during a bubble
period) – into one of the leading investment banks in the world. The levels of pay
(except at the most senior levels) were generally a response to the market.
Nevertheless, based on our interviews, we could not avoid concluding that pay
contributed significantly to a sense among a few that they were somehow unaffected
by the ordinary rules. A few investment bankers seemed to lose a sense of
proportion and humility.
2.30 We concluded that the reputational problems for Barclays stem in part from the
perception that, at least in the UK, some bankers have appeared oblivious to reality.
In the eyes of many stakeholders, despite the banks’ role in the financial crisis
(and the consequent recession), despite billions of pounds of liquidity support from
taxpayers, many senior bankers seemed still to be arguing that they deserved their
pre-crisis levels of pay (levels that were in any circumstances incomprehensible to
the general public). The press reports of bonus numbers made it appear as though
bankers in general were overpaid in the boom years and largely avoided sharing
in austerity.