What you need to know about the bank's top executives.
Management can make all the difference to a company's success and thus its share price.
To me at least, the best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. On the other hand, some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.
In this series, I'm assessing the boardrooms of companies within the FTSE 100 (UKX). I hope to separate the management teams that are worth following from those that are not.
I'm starting with Barclays (LSE: BARC), whose executive directors yesterday waived their 2012 bonuses after the bank was fined for manipulating the LIBOR rate. They have acted rather more swiftly than their colleagues at RBS (LSE: RBS) responded to its payments debacle, but it's doubtful that's enough to make up for the bank's reputation for boardroom excess.
Here are the key directors:
|Marcus Agius||(Non-executive) Chairman|
|Bob Diamond||Chief executive|
|Chris Lucas||Finance director|
Bob Diamond is an American investment banker who joined Barclays in 1996 and was appointed CEO in March last year. He built up Barclay's investment banking division from virtually nothing to being a major force, including the audacious acquisition of Lehman Brother's business when that bank collapsed. But growth has not come without risk: the division was betting heavily on Russian debt when the country defaulted in 1998.
Over a quarter of shareholders voted against Barclay's remuneration report after it was revealed that Bob Diamond's remuneration package for 2011 could cost up to £25m, including settlement of US tax, for a year when he admitted the bank's performance was "unacceptable". The bank had earlier claimed the remuneration was £6.3m, of which only £1.3m was not performance related.
Marcus Agius is a City grandee whose background is also in investment banking, with Lazard (NYSE: LAZ.US). Chris Lucas is former global head of banking at PriceWaterhouseCoopers. Of Barclay's nine non-execs, five are former investment bankers and four have finance and management backgrounds. There are, incidentally, two women.
I analyse management teams from five different angles to help work out a verdict on the board. Here's my assessment:
|1. Reputation. Management CVs and track record. |
Bob Diamond has been called "great but lucky".
|2. Performance. Success at the company. |
Shares have dropped 40% since Bob Diamond’s appointment.
|3. Board Composition. Skills, experience, balance. |
12 great and good, but a preponderance of former investment bankers.
|4. Remuneration. Fairness of pay, link to performance. |
|5. Directors’ Holdings, compared to their pay. |
Bob Diamond has £26m worth of shares – a whole year’s remuneration!
Overall, Barclays scores 11 out of 25 for me. As this is the first in the series, it's hard to benchmark -- but on this analysis I believe the board is below average for the FTSE 100.
I'm astonished that, as far as I can tell, nobody on the board of Barclays has experience in retail or commercial banking. At the recent AGM Marcus Agius said that the 'three Rs' of regulation, remuneration and reputation were crucial to the bank. Its remuneration policy is widely discredited. Its reputation has taken a big hit with the LIBOR scandal. And as for regulation, if the government's plans to ring-fence high-street banking operations are implemented, the board looks somewhat deficient to look after the ring-fenced part.
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> Tony does not own any shares mentioned in this article.