Here's the latest from our Highly Placed Professional.
This week’s report on Barclays’ pay and business practises makes for gloomy reading. All the more so because it’s clear that there was a sort of unhealthy club of 70 or so senior staff who were paid something like 35% more than industry average - and remember these guys were already at the top of the pay and bonus tree.
Now this sort of Mafia approach to pay often happens in smaller and badly run firms, where a few key people get into bed with HR and an inner circle ends up feathering their nests. But in the case of Barclays, we see the same phenomenon - and AFTER the financial crisis, when banks were meant to be a lot more responsible.
What makes the Barclays case even worse is that there appears also to have been a clear attempt to engage in dodgy, but immediately profitable, business practises such as PPI sale, tax avoidance schemes (for both clients and the bank itself), and risky proprietary trading. In fact, what has been reported is a veritable menu of risk excess and morally corrupt practise.
The main problem I have with a bank that makes £7bn and then pays a very insignificant amount in tax, is that management clearly thought that they were above reproach and could operate on a different moral plane to everyone else. In fact, I very much doubt that there was a lot of moralising going on there at all.
When the FSA told them to desist from selling PPI, for example, their managers suggested ways of sidestepping this direct order. Luckily the board rejected it. Do we care ? Well, we should. As I have mentioned before, if managers don’t put morality into the equation, we get firms that think they can get away with almost anything. Profitable departments will fight tooth and nail to keep going and protect their interests.
And soon there's no concept of right or wrong. When these behemoths, armed with untold leverage, dip their toe in the markets, there can often be dire consequences for us hard-up tax payers. And Barclays Chairman Sir David Walker’s reaction to the report is almost laughable: ‘The report makes for uncomfortable reading in parts.’ I guess when your nest is feathered like some Russian oligarch’s pleasure yacht, you don’t have to worry too much about such uncomfortable detail.
image: © Toby Jagmohan