Shortly after taking over as chief executive of banking group Barclays in August 2012, Antony Jenkins sent the company’s 150,000 staff a frank memo.
Jenkins was launching Transform, a programme to metamorphose Barclays from a financial services company that had just been fined £290m for attempting to illegally rig interest rates, into an ethical organisation. Not only that, he had a message for any employee who didn’t buy into the link being created between Barclays’ purpose and values and its business performance.
“Barclays is not the place for you,” he wrote. “The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues.”
Tough talk, but three years later, the rules had changed again and Jenkins himself was on the receiving end of a similar message from chairman John McFarlane, explaining that it was Jenkins who no longer fitted in.
“He was good at executing what we asked him to do,” said McFarlane, who was temporarily promoted to executive chairman. “What we are asking him to do now is different and the board believes that the probability of my executing is higher.”
Thus ended a brief but remarkable chapter in the lengthy history of Barclays. It’s an episode that leaves uncertainty about Barclays’ future direction and commitment to Jenkins’ ethical agenda.
But it also begs questions about what sort of culture change is possible within a commercial organisation in a very short period of time.
What kind of bank had Barclays become? How far did Jenkins succeed with his change agenda? What kind of organisation is the company now? And what will it look like at the end of the numerous investigations that remain unresolved from this inglorious period in Barclays’ history?
Creating a dynasty
Barclays’ history can be traced back to 1690 and the Quaker families, who combined their private banks in the 1890s and ran what they created in a dynastic fashion. Finding leaders from outside the families in the past three decades, however, has been a bloody business, with a series of succession crises.
A disastrous attempt to be “number one by ’91” set off a string of management coups and when Barclays announced that John Varley was stepping up from finance director in 2003, Daily Telegraph city editor Neil Collins commented: “Believe it or not, this is the closest to an orderly succession that Barclays has contrived in a decade or more.”
Varley’s handover to the next in line, Bob Diamond—a swashbuckling American investment banker—was also remarkably peaceable. This was despite the 2008 financial crisis having happened in the meantime, necessitating an emergency £7.3bn capital-raising from sovereign wealth funds in Qatar and Abu Dhabi, which is still being investigated by the Serious Fraud Office (SFO).
After that, however, the successions returned to form and Jenkins benefited from the one that dispatched Diamond.
One of the City’s so-called “rock stars”, with a remuneration package to match, Diamond was on a mission to grow Barclays into a global investment bank that could take on Goldman Sachs on Wall Street.
He was described as “inspirational” and a “true leader” by colleagues. However, his 19-month tenure as chief executive instead saw the bank mired in controversy, with Barclays fined £290m for manipulation of Libor interest rates by its traders.
Jenkins, who had previously been chief executive of Barclays’ retail bank, was promoted as a “Mr Clean” who would run the company in a quieter and more sustainable fashion.
Setting out his stall in that January 2013 memo, he criticised the banking of the past two decades as too aggressive, overly focused on short-term goals, and disconnected from the needs of customers, clients and society.
Barclays could only be a valuable business if it was driven by its values, he declared, installing five huge blocks emblazoned with the buzz words of “respect”, “integrity”, “service”, “excellence” and “stewardship” inside the entrance hall of its tower block in London’s Canary Wharf.
The memo still makes instructive reading. “Having a firm commitment throughout the business to strong values is not something I want to do for public relations or political benefit,” he stated.
“It’s not window dressing. It is simply how I will run Barclays and make it a more valuable and sustainable organisation.” The Transform programme involved a “Made by Barclays” film, those five values and a single cross-business “Purpose for Barclays,” defined as “helping people achieve their ambitions—in the right way”.
Mr Clean gets out his broom
Jenkins arrived in the top job, saying he wanted to make Barclays into the “go to” bank, and set out plans to cut 19,000 jobs, including 7,000 in investment banking.
He focused on remedying Barclays’ battered reputation by fighting its “toxic culture”; reducing the size and influence of its investment banking operations; and trying to reinvigorate its consumer-facing operations, building on its history as innovators of the world’s first credit card and Britain’s first automated teller cash machine.
He won friends among regulators and politicians, abstaining from his first-year bonus of £1m and even granting staff an extra day of annual holiday to allow them to pursue their own personal goals.
Convincing hard-nosed investment bankers that they now belonged to an “ethical organisation” was always going to be a hard sell, however. Declaring an intention to meddle with the investment bank’s traditional performance incentives, he said performances and rewards would be judged against a set of basic values, including respect for others and integrity, rather than on financial profits alone.
Such talk was welcomed in governance and regulatory circles where Barclays was under watch after becoming, in 2012, the first bank to settle with the UK and US authorities over the Libor manipulation claims.
However, Jenkins was nicknamed “Saint Antony”, “Mr Nice”, and “The Wet Handshake” by detractors who didn’t think he was up to the task of leading an aggressive investment banking operation.
“By the end of his tenure, he was scarcely seen around Barclays’ headquarters,” says one former senior staffer. “We used to call him ‘Ivory Tower Jenkins’ as he rarely came out of his office.”
While it was hard to fault Jenkins’ language and conciliatory efforts, the stream of bad news continuing to pour out of the company was illustrating just how toxic the culture had been.
In 2015, Barclays, Royal Bank of Scotland and HSBC agreed to pay £924m to settle claims from American investors that they had attempted to rig the foreign exchange markets.
Barclays’ share of this settlement was $384m, and the three banks paid a further $2bn to settle a class action lawsuit from pension funds and other institutional investors. They also shared around £2bn in regulatory fines from the affair, which is being investigated by the Serious Fraud Office. Further investor lawsuits were also lodged.
Barclays had bought the remnants of collapsed investment bank Lehman Brothers and seemed trapped in the high-living, testosterone-fuelled culture that had led to the 2008 global financial crisis.
Meanwhile, the consumer-focused side of the group was struggling under the weight of mounting claims from mis-sold personal protection insurance (PPI) policies.
New York attorney general Eric Schneiderman filed a 2014 lawsuit against Barclays, alleging that the bank had benefited unfairly through “high frequency” trading practices allowing large trades to be made extremely rapidly via automated software.
He also alleged Barclays was making unfair use of “dark pools”—trading platforms that allow such trades to be executed anonymously before the overall market becomes aware of them.
All this made Jenkins vulnerable to those inside the bank who wanted to close the door on the past. Jenkins’ weakness was that transforming Barclays proved akin to turning around a supertanker.
He said after he was fired that the turnaround task needed five to ten years to achieve genuine cultural change. However, Barclays’ revenues and earnings were suffering in the meantime. Pre-tax profits fell 8% in 2015 to £2.1bn.
Investors and non-executive shareholders representing their interests didn’t want to wait any longer and an internal row over the future of Barclays’ investment banking business saw Tom King, the head of that business, threaten to resign became the catalyst for Jenkins’ sacking.
On its announcement, McFarlane stressed that the investment banking operation would remain an important part of the group, worrying Mark Garnier, a Conservative MP and Treasury Select Committee member. Garnier tweeted that Jenkins’ departure and McFarlane’s focus on cutting costs, growing revenue and leveraging Barclays’ balance sheet sounded “rather pre-2007 crisis.”
The damning facts were that Jenkins’ talk of a transformation had not been accompanied by radical operational change. The company still had no fewer than 375 management committees. It lacked energy, said McFarlane, while its speed of decision-making was slow.
“Barclays is not efficient; we are not productive, we are cumbersome,” McFarlane told the BBC. “We have a very large bureaucracy, and personal accountability is not as high as we need it to be.
“It’s not just a reduction in costs. It’s a change in the way we do things that’s required here.”
Steadying the ship
Barclays replaced Jenkins with former JP Morgan investment banker Jes Staley, who arrived at the bank at the end of 2015. Staley has conducted a more conventional turnaround strategy, focusing on retail operations in London and investment banking in London and New York, and continuing a sales programme that has included Barclays’ Italian, Spanish and Portuguese operations.
It is also currently disposing of its African bank, Iberian credit card business and Asian wealth management operations.
In October, Barclays announced a £600m top-up to its PPI provisions, taking them to £8bn.
Barclays’ past conduct will continue to haunt it for some time, however. The group is still dealing with the fallout of an investigation by the US Securities & Exchange Commission into its Barclays Wealth high net worth private investment division.
Andrew Tinney, the division’s chief operating officer, resigned in 2013 amid claims that he secretly shredded a report that described the bank’s stockbroking and investment arm as “out of control”.
The report found that Barclays Wealth America “pursued a course of revenue at all costs and had a culture that was high-risk and actively hostile to compliance”. Mr Tinney is now fighting a lifetime ban from financial services by the Financial Conduct Authority (FCA).
Barclays also faces a US probe into the bank’s recruitment practices in Asia, an FCA investigation in the UK into the sale of structured products to retail customers, and a fraud inquiry at a subsidiary of its African bank.
In addition, the company is being taken to an industrial tribunal by Richard Boath, its former co-head of global finance, who claims he was unfairly dismissed after the SFO shared with his employer a 900-page transcript of interviews he gave to officials investigating the bank.
Staley and Barclays have little choice but to continue to deal with such legacies of Barclays’ past, whilst attempting to ensure a sustainable, profitable future for the much slimmed-down version of the bank that will survive.
The Jenkins era, meanwhile, will probably go down in history as an idealist effort to take an extremely long-term view of banking operations that make most of their money on very short-term timelines when markets boom.
Despite stock market indices having recently reached new highs, that seems another era now, but some observers had the prescience to see that Jenkins had been given an impossible task.
Tony Manwaring, executive director at Tomorrow’s Company, the corporate governance think-tank, said at the time of Jenkins’ appointment that he thought Barclays had “a real understanding of what they’ve taken on”, but was “bound to discover things that they haven’t yet fully recognised”.
He added: “There will be all sorts of points of challenge where they are tested and will have to make business judgements about what really will generate value for the long term.”
Four years on, much the same could be said about Staley’s chances of success. However, his strategy will now depend much more on operations from which banks have traditionally made money for centuries.
Barclays’ august founders would no doubt approve of that.
Andrew Cave is an experienced business journalist.