Barclays – more own goals from the bank we love to hate

Barclays committed two reputational faux pas last week, one of which was widely reported in the media, the other less so.

Bankers’ pay and bonuses are classic newspaper fodder. Twenty years ago, no journalist would have dreamed of writing a story that focused solely on the pay of a senior financial services executive. Indeed, talking about money and earnings was considered vulgar. At least it was in the UK. Today even the FT has given in to the habit.

The publication last week of Direct Line’s first annual report (the insurance business is decoupling from RBS), was covered by FT insurance correspondent Alistair Gray. CEO Paul Geddes’ performance bonus and level of pay was the top story under the headline: “Direct Line pays its chief £1.86m.” In case anyone thinks this is a one-off, the FT’s top financial services story today (23 March) covers Credit Suisse CEO Brady Dougan’s £7.8m salary. The salary of Phoenix Insurance CEO Clive Bannister has, we are told, increased by 19% this year.

Fair enough. In the aftermath of the banking crisis, where the obscene levels of bonuses paid to investment bankers were exposed to public scrutiny, there is legitimate public interest in the annual financial services pay round, and particularly for the investment banks whose recklessness caused all the trouble.

Moreover there is a not-so-delicious irony in the hardship being faced by most of the population; pay freezes again this year, while inflation hovers stubbornly at 2.8%. The Chancellor’s grim description of the economy, and the need for belt-tightening also adds fuel to the popular ire over how the other 1% live, mostly at Canary Wharf.

Barclays is of particular interest, because ex-CEO Bob Diamond became, after Sir Fred Goodwin, the poster boy for critics of the levels of remuneration in investment banks. He was paid a fortune, and so were his lieutenants, including the perfectly named Rich Ricci.

After Diamond Bob’s ignominious exit, new broom Anthony Jenkins, a Barclays lifer, promised to reform the culture in the bank and return it to its Quaker roots – ethical, moral, communitarian with customers’ interests at its heart. So it was hardly surprising that the bank’s decision to announce massive bonuses for its senior executives on Budget day was greeted by a chorus of catcalls and criticism.

As for the bank’s excuse that it was never the intention to bury bad news, that simply didn’t wash, given the date for the Budget was set three months ago. Neither was the bank helped by pictures of the aforementioned Mr Ricci enjoying himself at the Cheltenham Gold Cup dressed in bespoke tweeds and an expensive pair of sunglasses – natch.

The second faux pas related to the juxtaposition of a Barclays analyst note to would-be retail investors, advising them to continue to invest in equities, despite the latest Eurozne-led market correction, while members of the Barclays executive were busy selling millions of shares.

Last week, aftr receiving his LTIPs, Mr Ricci sold all £17m of his awarded shares immediately. A number of media outlets picked up on the story, asking why retail investors were being advised to do one thing, while bank bosses were doing the opposite.

Of course, the issues surrounding LTIPs, bonuses and share awards are complex, and relate to past performance over a number of years, but Barclays’ reputation is so poor that it does not have the luxury of appealing for its critics to give the bank the benefit of the doubt, especially when the chief executive has made bold promises about the new transparent and honest culture he wants to create at the bank.

Oh, and by the way, Mr Jenkins also announced earlier in March that up to 40,000 jobs could go at the bank as it moves increasingly towards online and automated banking.