Barclays’ chief executive Jes Staley is a supportive colleague and friend. Since starting work in December 2015, he has brought in at least four senior executives who had worked with him at JPMorgan Chase, to help revamp the UK bank.
Then in June, when Barclays received two anonymous letters making unpleasant allegations of what the bank describes as “a personal nature” about one of those hires, Mr Staley went a good deal further. Believing the letters to be an “unfair attack”, he asked Barclays’ security team to track down the author, but was told that was not appropriate because the bank’s compliance department had logged the letters as potential whistleblowing. A month later he went back and asked if the issue had been resolved. Exactly what Mr Staley was told is disputed, but he called in the hounds again and this time they tapped US law enforcement for help.
That episode, which came to light this week, may make Mr Staley a very good friend, but it also makes him a very bad chief executive.
Decades of corporate scandals — from Enron’s 2001 collapse, to Wells Fargo’s fake accounts scheme — have taught us the importance of empowering whistleblowers. When companies start to go off the rails, whether through accounting shenanigans or overseas bribery, ordinary employees, customers and suppliers are often among the first to see it. If they are taken seriously, misconduct can be caught early, before it becomes endemic.
But it requires courage for whistleblowers to act on what they see, especially in the UK. A recent survey by the Ethics Resource Centre of employees in 13 countries found that 63 per cent of British employees who reported wrongdoing experienced retaliation, second only to India and far worse than the 36 per cent global average.
Barclays, of all places, should be particularly solicitous of those who want to expose wrongdoing. The bank is notorious for its constant legal tangles. It has admitted attempting to rig three separate sets of benchmarks — Libor, foreign exchange and Isdafix — and has been forced to eject chief executive Bob Diamond in the process. At a time when most banks have put their legal woes behind them, it is still being probed by the UK over a 2008 capital-raising drive and is fighting US allegations of mortgage securities mis-selling.
Against that background, Mr Staley’s decision to investigate the anonymous letter writer sends exactly the wrong message. Even if the claims were as unfair as he believed, bringing the full power of Barclays’ security team and US law enforcement to bear was inappropriate and counterproductive.
“Healthy organisations encourage their employees to speak up and they focus on the misconduct reported, not the person who reported it,” says Jordan Thomas, a lawyer who helped develop the US Securities and Exchange Commission’s whistleblower programme and now represents whistleblowers. “If your people don’t trust you, they won’t talk to you.”
To be fair, the Barclays board has taken the matter seriously. When a second whistleblower alerted them to Mr Staley’s yen for detection, they immediately ordered an investigation, reprimanded Mr Staley and reported him to the UK banking watchdogs. They have also promised a “very significant” cut to his bonus once the regulatory probes are complete. “I am personally very disappointed and apologetic that this situation has occurred,” chairman John McFarlane said in a statement.
The bank has also promised to review its whistleblowing programme, even as it cut ties with the technology company that was set to provide an anonymous internal chat service that could be used to report issues.
Mr Staley’s supporters argue that he apologised and took his medicine, and that he should be allowed to get on with reviving Barclays’ sagging investment bank. The board seems to agree — it declared that the attempted witch hunt was an honest mistake and the CEO still has their “unanimous confidence”.
The board was probably seeking to reassure investors about Mr Staley at a time when he has had some success in bolstering Barclays’ performance. In this, they seem to have succeeded: Barclays shares are basically flat.
But the board’s instant declaration of unconditional support also suggests that its support for anonymous tipsters only goes to so far. Barclays employees can take a hint. If they are considering reporting information that might threaten the chief executive — or his friends — they are likely to think again. And that is likely to be much worse for investors in the long run.