Salz Review - Wall Street Journal

87
Salz Review
An Independent Review of Barclays’ Business Practices
8.36 Compared with other parts of Barclays, the investment bank lacked history. So its
leaders had an opportunity to define their own cultural context. The investment
bankers tended to regard the retail bank as slow, indecisive and un-commercial. In
contrast, the investment banking characteristics were hard-working, fast, competitive
and well rewarded for success. So despite being part of the Group and benefiting
from a lower cost of funds supported by a single credit rating, and retail inflows, the
investment bank tended not to recognise the relevance of Group and was never
likely to adopt its culture.
8.37 Nor was it likely to adopt the culture of Barclays’ Corporate Bank (or its Business
Bank) which, while quite distinctive and emphasising integrity, was described by a
number of interviewees as being relatively conservative, hierarchical and slowmoving
– perhaps reflecting an emphasis on tenure and loyalty over performance.
8.38 The culture in Barclays Capital was influenced from its inception by its need to hire
people to build the business. And Barclays did build, almost from scratch, a worldclass
investment bank – which no other UK bank had achieved in the same period of
time. The mantra was to hire the best people – and as a challenger, Barclays Capital
often had to pay a premium. This reinforced a tendency to apply disproportionate
value to personal commercial performance as well as to assume that simply
increasing compensation would resolve issues at senior levels. While compensation
overall was broadly in line with peers, compensation for the ‘group of 70’ most
highly-paid executives 154 was consistently and significantly above the peer group
median (see Section 11). The stable, close-knit leadership team brought continuity,
experience and a common understanding. We were also told that this made it hard
for others to inject challenge.
8.39 The Lehman acquisition instantly increased the size and complexity of the
investment bank leadership challenge. Lehman had a distinct culture and the
combined organisation triggered issues of size and complexity. Running this larger
organisation undoubtedly demanded more emphasis on formal systems and
processes. But many of our interviewees told us that while some members of
Barclays Capital’s top team inspired and valued loyalty, the team disliked bad news.
This all combined to create an environment in which leaders were rarely effectively
tested or challenged, contributing to a sense of ambiguity about what was considered
right and wrong.
8.40 We also heard evidence of human resources leaders who lacked authority to impose
policies and exert sufficient authority to influence how the business was led (see
Section 10). Reluctance by staff to escalate issues, coupled with an expectation that
employees needed to show that they could resolve problems themselves, rather than
look to others to do so, created a culture that lacked openness. Given these
dynamics, we did not find it surprising that some in Barclays Capital failed initially to
154 For the purposes of the report we defined this group as including Executive Committee members in
Group, RBB, WIM and CIB; IB employees earning more than £5m; and any employees in RBB, WIM
and CB who are one of the top ten highest earners in their business unit but are not on the Executive
Committee. This group received the most scrutiny from the Board Remuneration Committee, and the
number of executives varied slightly year on year.