When Jes Staley rode to Barclays’ rescue in 2015, the new chief executive promised to change the UK bank’s culture and draw a line under its contentious relationships with regulators. “There can be no retreat from becoming a values-driven organisation which conducts itself with integrity at all times,” he wrote in a memo to staff.
Six years later, Staley is out on his ear, after his personal conduct ran into regulatory hot water for a second time. Staley stepped down this week after the Barclays board learned the preliminary conclusions of an investigation into the way he characterised his relationship with disgraced financier and sex offender Jeffrey Epstein. He plans to fight the findings.
It is about time the board showed some backbone. Staley got off lightly for twice trying to uncover the identity of a whistleblower in 2016. The Financial Conduct Authority and the Prudential Regulation Authority fined him £642,430 and his bonus was docked £500,000 but that was peanuts to a man of his means. The board remained onside as the share price fell, an activist investor attacked and the watchdogs announced their Epstein probe.
Barclays insists that “the investigation makes no findings that Mr Staley saw, or was aware of, any of Mr Epstein’s alleged crimes”. That’s an odd way to describe a relationship that included Staley, then head of JPMorgan Chase’s private bank, visiting Epstein in 2008 while he was serving time for soliciting sex with a minor.
Presumably the bank means that it has no evidence that Staley personally saw anything untoward, not even when he sailed his yacht to the sex offender’s private island in 2015. Staley has said his contact with Epstein ended “totally” before the latter’s second arrest in 2019.
But the watchdogs are not happy with what Staley told an internal investigation after that arrest, which Barclays relayed to them. The FCA and PRA have a cache of emails supplied by JPMorgan that apparently suggest the relationship was friendlier than described.
None of this looks good for Barclays. Its last three bosses have now left under pressure, and the fourth was criminally charged (and eventually acquitted) after his departure. Bob Diamond resigned in 2012 after the Bank of England signalled it had lost confidence in him over the Libor rate-rigging scandal. Antony Jenkins was summarily removed after he clashed with the head of the investment bank. John Varley left voluntarily in 2011 but later faced fraud charges over a 2008 capital raising.
Several other UK and European banks have had CEO transition issues. Credit Suisse parted ways with Tidjane Thiam last year after a corporate spying scandal. Standard Chartered cleared out Peter Sands after the bank engaged in a bruising fight with US regulators and its performance faltered. Not to mention Fred Goodwin and Andy Hornby, who ran their banks aground during the financial crisis.
There’s a common theme among these blow ups. It seems that highly paid, high-profile chief executives start to believe their own hagiographic press releases and end up acting like Roman emperors immune to criticism and even advice. In the worst cases, they forget that rules aren’t just for other people.
Staley has a record of prioritising his personal relationships. He ignored warnings and repeatedly asked the Barclays security team to track down the author of a letter that made allegations against a senior executive whom the CEO had personally recruited. He also backed his brother-in-law in a dispute over a failed Brazilian deal over the objections of KKR, a Barclays client.
Part of this has to do with the type of person who wants to become a bank boss. There is much more money to be made, much more anonymously, in hedge funds or private equity, so those who opt for banks must enjoy courting the limelight and be willing to risk public criticism.
Boards and investors also expect more these days. CEO tenure has been falling globally, and a study from the Conference Board and Esgauge analytics found that almost 40 per cent of forced departures last year in the Russell 3000 were due to personal misconduct — almost as many as in 2018, when the #MeToo movement was at its peak.
Yet the biggest US banks have not seen the same level of turmoil since the financial crisis. Michael Corbat left Citigroup ahead of a regulatory rebuke last year and Wells Fargo’s John Stumpf was felled by a fake accounts scandal in 2016, but Wall Street’s other giants are run by “forever CEOs”.
To be sure, US banks are more profitable, so investors have less to complain about. These Wall Street chiefs also do not have to deal with independent chairs looking over their shoulders. It would nice to believe that JPMorgan’s Jamie Dimon, Morgan Stanley’s James Gorman and Bank of America’s Brian Moynihan have surrounded themselves with strong executives who can push back against bad ideas.
In ancient Rome, victorious generals were assigned a special kind of slave during triumphal processions. Legend holds that the auriga not only held a laurel crown over the commander’s head, but also whispered “memento mori” (remember, you die) into his ear. Perhaps bank chiefs need a similar service.
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