The Men Who Run Barclays

Published in Investing on 28 June 2012

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:

DirectorPosition
Marcus Agius(Non-executive) Chairman
Bob DiamondChief executive
Chris LucasFinance 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.

Remuneration

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:

 Score
1. Reputation. Management CVs and track record.

Bob Diamond has been called "great but lucky".

 

3/5

2. Performance. Success at the company.

Shares have dropped 40% since Bob Diamond’s appointment.

 

2/5

3. Board Composition. Skills, experience, balance.

12 great and good, but a preponderance of former investment bankers.

 

1/5

4. Remuneration. Fairness of pay, link to performance.

‘Nuff said.

 

1/5

5. Directors’ Holdings, compared to their pay.

Bob Diamond has £26m worth of shares – a whole year’s remuneration!

 

4/5

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.

Astonished

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.

Let me finish off by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares he should buy. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent UK blue chip. Buffett's investment decision is covered in full within this special report -- but hurry, "The One UK Share Warren Buffett Loves" is free for a limited time only.

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> Tony does not own any shares mentioned in this article.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

BrnzDrgn 28 Jun 2012 , 12:28pm

The blame is with the boardroom because they did not have any controls in for this behaviour. The real calamity was caused by the over paid chinless wonders who were in the offices!

heatingman 28 Jun 2012 , 12:57pm

Well, BIG pay can go out of the window now. They are not worth anything like what they believe we should believe they are worth. Hoodwinked.

tru2me 28 Jun 2012 , 12:59pm

Good idea to do a series grading management of the FTSE.

Don't know but I suspect the crux of the matter regarding this bank is.

Barclays did not need a tax payer bailout post financial crisis unlike RBS and Lloyds.

Therefore Barclays boardroom may have been able to hide and manipulate so much more from all of us.

LIBOR manipulation seems to have come out of the woodwork.

RomfordBoy 28 Jun 2012 , 1:44pm

Ram59

Whilst Barclays did not take government money it was only due to the investment from Abu Dhabi/Qatar entities that it was able to continue its operations without the shackles of the UK taxpayer. Essentially they could carry on as before - and it appears like they did!!

RB

theRealGrinch 28 Jun 2012 , 3:21pm

cowboy diamond should be in prison with the rest of the criminals and fraudsters

GoldenSoldier 28 Jun 2012 , 4:39pm

My experience of life has taught me that most of the people who wear a perpetual grin are either dishonest or incompetent.

andrew97d 28 Jun 2012 , 5:10pm

The guys who did a deal to pocket £9 million by overcharging Sainsburys for spuds got a few years in jail. Ditto the German investment banker involved in the part sale of F1 in 2006.

Lets see the full force of the criminal justice system bearing down on Barclays management if it can be proved that they knew about this scam at the time.

Dozey1 28 Jun 2012 , 6:02pm

I agree wholeheartedly with others who would like to see proceedings taken against individuals, from traders on the floor to directors in the gods. If manipulating interest rates in order to procure an advantage at the expense of customers is not fraud and deception then what is? The fine means next to nothing to the perpetrators and those responsible for this behaviour. Let's see individuals fined, the fines to include all bonuses awarded over the period of fraud, and the worst cases behind bars. Shareholders should not shoulder the total burden.

Longtermyieldman 28 Jun 2012 , 6:18pm

To me, Bob Diamond exemplifies everything that's wrong with modern capitalism. He as feted for making big profits at Barclays Capital. But these profits were illusory, based on being very heavily geared and, it now appears, smiling close to the wind. Did he direct the misdeeds or turn a blind eye to them, or was he unaware of what was going on in the firm he ran? Whatever the answer, he deserves to go.

The LIBOR manipulation was widely rumoured and reported in the press at the time, yet the FSA did nothing. Eventually, US regulators acted. The outcome? A sizeable fine for the company, and probably a decade of litigation. And who will pay for this? Not the directors, not the Barclays Capital management, not the traders who rigged the markets, but the myriad small shareholders who, whether directly or through their pension funds, are the economic owners of the firm. And can they dismiss the delightful Mr Diamond? Sadly not - because the system is set up to protect the hired hands that run firms on investors' behalf. A sorry state of affairs indeed.

Markernw 28 Jun 2012 , 7:07pm

Has anybody bought Barclays today then?. At the risk of getting a slating I'll confess I did. I'm quite new to investing but having followed the writings on here and read the quotes about being contrarian, blood on the streets, people being fearful etc etc, I thought a panic and a 15% fall in the share price was a good opportunity so I bought some?.

apprenticeDRL 28 Jun 2012 , 8:07pm

I have looked at them, not sure if you shouldnt wait a bit longer, I think this story has a way to run yet.

fartarse2 28 Jun 2012 , 10:32pm

"Let me finish off by adding that legendary investor Warren Buffett has always looked for impressive management teams when pinpointing which shares he should buy. So I think it's important to tell you that the billionaire stock-picker has recently acquired a substantial stake in a prominent UK blue chip. Buffett's investment decision is covered in full within this special report -- but hurry, "The One UK Share Warren Buffett Loves" is free for a limited time only."

Are words to the effect of these becoming an unofficial Fool signature?

kiffberet 29 Jun 2012 , 9:37am

Dozey1: "Shareholders should not shoulder the total burden."

Sadly, shareholders will shoulder the total burden. They hired these clowns, so they pay the price.

Maybe next time round, they'll vote them out of office and then call the serious fraud office, so they can investigate the matter for the next 3 years.
Outcome (I cynically predict): fine appealed over and over and over, and eventually reduced to £10m because there is not enough evidence and Barclays were 'helpful' in the investigation.

notsloc 29 Jun 2012 , 10:10am

Good article and I look forward to more about management teams.

I would like you to add a sixth angle of analysis, one which has served me well over time. Before investing I ask myself: "would I buy a used car from the directors?

Your score on that measure would be interesting!

coulddobetter 29 Jun 2012 , 11:06am

Several years ago, during the "meltdown" I remember reading an article in the States about the State of Massachussetts suing Barclays. It was, if my memory serves me right, to do with toxic assets in bonds sold to them by the bank. The words that stick in my mind were "The whole thing was engineered in Canary Wharfe".
Does anybody remember this or know of the outcome?

compound200 29 Jun 2012 , 12:35pm

its amazing or maybe not

madoff---london branch
jp morgan--london branch
stanford-london branch

snikmij 29 Jun 2012 , 1:03pm

Don't forget the role BBA had in this.

snikmij 29 Jun 2012 , 1:23pm

Also to add, where is the money to pay for the fine going to come from, is it profits or the directors income?

snikmij 29 Jun 2012 , 1:25pm

Also a lawyer was interviewed on Jeff Randall live Thursday night (27/6) who said that Barclays could be liable for millions if not billions of lawsuits.

TRhere 29 Jun 2012 , 1:35pm

Ram59 & notsloc - thanks for the feedback on the series. I agree 'would you buy a used guy from the directors?' is a good test, but hope the answer comes through in the analysis.

Generally - I agree it would seem shameful if some criminal prosecutions don't eventually come out of this whole story.

Interesting piece in the Times today which gave a pen portrait of all the Barclays board - except they forgot the finance director, one of only 2 executive directors and the one most responsible for control. That says a lot about what's wrong with boards, in my view.

Tony R

Basia02 01 Jul 2012 , 11:55am

I have believed for many years thats Barclays is run for the benefit of the Directors. They stiffed the shareholders and the customers, and now it appears they dont care how they do it. the fine should come from a refund on the Boards remuneration - Bobs had over £100 million I believe.

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