By Tom Lloyd
Visiting Fellow to Northampton Business School
The departure in mid-April from Barclays Capital
of Rich Ricci, his pockets bulging with £18m of deferred remuneration, marked the
end of the Diamond age at Barclays, and the beginning of … what exactly? Normalisation;
retrenchment? What was it that Barclays was putting behind it with its ejection
of the last of BarCap’s notorious ‘three musketeers’ (the other two, Bob
Diamond and Jerry del Missier, left last year, with similarly bulging pockets,
in the wake of the LIBOR scandal)?
The official answer is that with the Augean
stables of ego and greed cleared out,
Barclays can get back to ‘normal’ – to an appropriate allocation of risk and
reward between employees and shareholders, and to incentive systems designed to
encourage staff to deliver high quality customer service, rather than high
sales.
The normalisation programme launched by the
new Barclays CEO Antony Jenkins is billed as a strategic review, and called
‘Transform’. It is very likely to implement the recommendations of the Salz
Review commissioned in July 2012, and published in April 2013.
Although sceptics could be forgiven for dismissing
the Salz Review as a whitewash job, on the grounds that Anthony Salz is
executive vice-chairman of Rothschild, and thus can be expected to have a vested
interest in the investment banking status
quo, the review is well worth a read.
It suggests that BarCap’s extraordinarily
generous bonus policy was an important contributor to the bank’s woefully
unethical culture, as evidenced by the mis-selling of Payment Protection
Insurance (PPI), and by attempts to manipulate the London Interbank Offer Rate
(LIBOR). It comes close to suggesting that there’s an inverse causal correlation between levels of executive pay and
ethical standards.
This conjecture is worth thinking about. Is
it intuitively plausible for one thing; does it seem likely that extremely well
paid people tend to be less ethical than average? Do extremely high levels of
pay overwhelm or weaken ethical norms? Does the exaggerated sense of entitlement
of Rich Ricci and his fellow ‘musketeers’ free them from ethical standards that constrain normal
behaviour? If any of these conjectures seem plausible, what can be done about
it?
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Visit our website at www.cceg.org.uk/
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Thanks Tom as always you capture key issues so eloquently. We have discussed on many occasions the widening income gap in companies and the lack of correlation with corporate performance, but the implication that there is an inverse relationship with ethical behaviour is significant ... and worrying. More research needed here. keep up the good work!
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