Finance

Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Barclays Plc clearly cares about whistle-blowers. After all, a whistle-blowers' "champion" sits on its board, and the British bank claims the way it deals with them is "appropriate" and "successful."

A shame, then, that CEO Jes Staley's misguided, unjustified and ultimately unsuccessful attempt to unmask a whistle-blower has dealt Barclays's and his own personal credibility a big blow.

Market-Friendly
Barclays has outperformed peers under Jes Staley
Source: Bloomberg

The timeline of events, according to Barclays, goes something like this. In June 2016, two anonymous letters were sent to the board and a top executive raising "concerns" about a senior employee and the process surrounding his or her recruitment.

A month later, despite being told previously that it would be inappropriate to try to unmask the authors, Staley asked the bank's security team to mount an ultimately unsuccessful probe, going so far as to enlist the help of U.S. law enforcement.

This sorry tale reaches the board in early 2017 thanks to -- surprise, surprise -- an employee blowing the whistle on the bank's internal processes.

Barclays is trying to take swift action. On Monday, it gave Staley an official reprimand and promised to cut his 4.2 million-pound ($5.2 million) pay package. But in the statement, the board endorses the view that Staley was acting on an "honestly held but mistaken" belief that he had clearance to mount his own investigation.

That suggests either that Staley is unaware of whistle-blower protections in both the U.K. and U.S., or that the bank doesn't know how to communicate with its CEO. Again, Barclays clearly says that it advised Staley unmasking a whistle-blower was "not appropriate."

This will surely require yet more investment in overhauling its internal processes. It might also lead to fines or other penalties from U.K. and U.S. regulators.

Then there's the serious question of whether Staley's personal interests are aligned with the company's. The word "personal" appears five times in Monday's release: Staley was personally implicated, personally aggrieved and personally keen to defend a colleague facing accusations.

It's not clear whether Staley was defending his own character given the letters talk about a recruitment process. The fact that this was linked to a hiring process casts a shadow not just on Staley, but on the new executives he has hired -- several of whom come from his old employer, JPMorgan Chase & Co. Staley risks being seen to be protecting some employees over others.

That's not a good look for a CEO who has cut thousands of jobs in recent months, nor is it good for the morale of those employees trying to deliver his turnaround plan.

Fewer Bankers
Barclays group costs have fallen under Staley, who has cut thousands of jobs
Source: Bloomberg

For now, Staley has the "unanimous" confidence of the bank's board, and investors don't seem to view this is a resigning issue. They're probably right, if only thanks to Barclays' disclosure and actions. After initially slumping, the shares climbed 0.3 percent on Monday.

Analysts at Shore Capital reckon the board's punishment, which will have been discussed with regulators, probably lessened the risk of a dismissal. 

But even if Staley lives to fight another day, this episode looks far murkier than the open-and-shut internal inquiry suggests.

It goes right to the heart of Barclays' internal culture, implying that staff are at risk of unfair treatment as a result of weak institutional processes. It goes right to the top of the bank: Staley didn't just make an error of judgment, there was an apparent breakdown of the constraints that ought to keep him in check. 

The recent departure of Charlotte Hogg at the Bank of England shows the need for exemplary behavior in an industry where employees still fear reprisals if they speak out.

Barclays's own disclosure suggests both the bank and its CEO have a lot of ground to recover.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net