Barclays's Whistle-Blower Case Leaves a Bitter Taste
(Bloomberg Gadfly) -- U.K. regulators have given Barclays CEO Jes Staley what looks like a slap on the wrist after his botched attempt to unmask a whistle-blower.
He will be fined, but will get to keep his job -- lucky for the board, given their lack of appetite for a power vacuum at the top of one of the country’s biggest banks. Ousting Staley, just as the lender is under pressure from an activist investor, would have triggered turmoil.
CEOs make mistakes, for sure, but the way Barclays and regulators have handled the episode will only leave a bitter taste for whistle-blowers afraid to speak out and for others in the industry looking for clarity on ethical rules.
Barclays said on Friday that the preliminary findings from Britain's Financial Conduct Authority and Prudential Regulation Authority contain nothing that would dent the board’s “unanimous” confidence in Staley.
Yes, the regulator alleges the CEO did breach its code of conduct -- Rule No. 2, “you must act with due skill, care and diligence” -- and should be fined accordingly. But the bank points out that there were also rules he was not found to have breached -- like Rule No. 1: “you must act with integrity.” There was no charge he had failed the “fit and proper” test to be an FCA-approved manager. So it all evens out.
Trying to reconcile these mixed messages is hard when going back over the events. According to Barclays’s own summary last year, Staley tried to identify the source of anonymous allegations against a colleague, even after having been told it wouldn’t be appropriate. He used the company’s security team, which enlisted a U.S. law-enforcement agency to help. After this was found out, he apologized and admitted he got too “personally involved” in trying to protect the target. The conclusion seems to be that this is sloppy management, rather than improper behavior.
To an outsider, Staley’s behavior looks to have fallen short of the “exemplary” behavior Bank of England governor Mark Carney has demanded of the City. Rank-and-file bankers need better and clearer examples to follow, both inside and outside their firms. Staffers who want speak up about bad behavior need to feel they can do so without fear of internal reprisals.
Staley's error of judgment was revealing -- in trying to defend a friend he rode roughshod over the bank's internal checks and balances. But it risks leaving the impression that in the City of London, CEOs are somehow held to laxer standards than their more junior employees. Call it the impunity gap.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.
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