Wednesday, 25 July 2012

“As Taken Aback As Everyone Else”: The Salz Inquiry At Barclays

“The global review will assess the bank’s current values, principles and standards of operation and determine to what extent those need to change; test how well current decision-making processes incorporate the bank’s values, standards and principles and outline any changes required; and determine whether or not the appropriate training, development, incentives and disciplinary processes are in place. The review’s findings and recommendations will be published, based on evidence gathered through extensive engagement with all of the bank’s stakeholders and a thorough review of all pertinent documentary evidence. Any interested party is encouraged to provide input to the review by submitting a perspective or evidence via

Thus, the Barclays press release announced that Anthony Salz is to conduct an independent review of Barclays culture which will conclude by next April. This is a fairly straightforward, low risk, defensive move by a bank which has sustained massive reputational damage in the past few weeks since it was fined for fixing Libor

First, the CEO and chairman have to go, as a kind of penance. Then Barclays performs a kind of corporate moving on. Hence the independent inquiry whose (not too onerous) recommendations can  be ostentatiously implemented.

The precautionary motives of Barclays now manifest themselves in two ways, through the terms of reference of the inquiry and the choice of the lead inquirer.

First, the inquiry’s terms of reference are narrowly defined as “ business practices” understood as “values, principles and standards of operation”. And that fits with an idealist and dematerialised definition of culture as “instinctive behaviour and beliefs” The investigation does not consider the Barclays  business model in retail and in investment banking. Salz will not ask whether expensive branches and free current accounts means mis-selling in retail to recover costs. Nor ask why investment banking is a joint venture which benefits bankers more than shareholders and generates a balance sheet larger than British GDP.

Second the inquiry will be led by a silver haired corporate lawyer who is one of their own. Salz is, a man with an “urbane manner and establishment background” according to the BBC ‘s Robert Peston who has known him “for donkey’s years”. Salz is well networked in investment banking via his role as lead lawyer on twenty years of M&A deals at the law firm Freshfields where he was senior partner until 2006. He is also one of the great and the good, with roles including senior positions on the BBC board, alongside Barclay’s now disgraced chairman Marcus Agius. Barclays chose this man Salz and not, for example, an awkward churchman with a conscience like Rowan Williams.

Salz has the track record, reputation and recent experience that fits him for this kind of independent inquiry into banking culture. Let's recall Money Week's profile of Salz in 2006. This looked back to the takeover deal which helped to make his name and from which Salz emerged stronger while others went to jail:

"In 1986, he advised Guinness on its bid to buy Distillers and “was as taken aback as everyone else by the wrongdoing that emerged”, says The Sunday Times. Salz claimed he had repeatedly warned directors of the illegality of their actions – a version of events that conflicted with that of Guinness chief Ernest Saunders. It was a nail-biting time, but Salz won the day and emerged from the episode stronger

And Money Week explained that Salz was the man to make sure that everything was within the law:

"Corporate lawyers are two a penny. What makes Salz so special? Clients claim it is his bold, imaginative approach that makes him a star. “Most lawyers tell you why not to  do something, but Anthony is creative,” says David Mayhew at Cazenove. “He will show you how to do it within the law. And he has a wicked sense of humour.” 

We would add that Salz has since 2006 has added experience of chairing inquiries. According to his profile in the Barclays press release 

(Salz) chaired the Independent Commission on Youth Crime and Antisocial Behaviour in England and Wales, which reported in 2010. He also chaired two review groups on press self-regulation on behalf of the Media Standards Trust (on which Board he sits), which published reports and recommendations in 2009 and in June 2012.

The failure of press self regulation  and serial misbehaviour by the tabloids of course led to Leveson. And this independent inquiry into Barclays under  Anthony Salz is a poor substitute for the Leveson for the banks which CRESC and others have been asking for.

Dyfal Donc