Barclays Bank came from Quaker and non-conformist companies in England that were famed for their ethics. Even so, the charges announced by the Serious Fraud Office against former Chief Executive, John Varley and colleagues is not the first time in recent years that the tradition of ethics at Barclays has come into question.
The allegations against Varley date back to after the sub-prime banking crisis, when the bank was proud to say that it had escaped the need for the kind of state ownership that other banks required. What Barclays failed to escape was the risk taking culture that had taken root across the UK banking sector.
In 2012, the reputation of Barclays was hit when, with a number of other global banks, it was fined for its role in manipulating the LIBOR interest rate, a reference for credit right across the market. The bank had demonstrated, in the words of its chairman, unacceptable standards of behaviour. The chief executive, Bob Diamond, successor to John Varley, resigned and the bank appointed Antony Jenkins as a new CEO, to clean up the stables - and focus on values.
Jenkins in turn commissioned an eight-month independent investigation, the Salz Review, at a cost of US$21 million to report on how to change the values that had led the organisation astray. In the same chapter of thinking as critiques of 'institutional racism' (a phrase coined by the black power activist and pioneer Stokely Carmichael), organisational values were in the dock.
Salz concluded that 'Barclays should set clear targets against which to assess progress on embedding the values necessary to build a strong ethical culture. Progress against these targets should be measured through employee, customer and other stakeholder surveys and should be reported regularly.' Barclays then set about implementing the report, with a programme to manage staff performance against a set of core values, including integrity and respect for others.
Bonuses would be assessed against a new set of criteria focused on purpose and values. To staff, Jenkins explained that "there might be some of you who don't feel they can fully buy in to an approach which so squarely links performance to the upholding of our values....My message to those people is simple: Barclays is not the place for you. The rules have changed. You won't feel comfortable at Barclays and, to be frank, we won't feel comfortable with you as colleagues."
But changing values and culture takes time. Jenkins was appointed as chief executive to clean up the bank and within three years the board had changed its mind. What they wanted was to boost earnings. The new executive chairman, John McFarlane, explained that Jenkins 'was good at executing what we asked him to do at that time. What we are asking him to do now is different.'
Of course, values are not just about leaders, but for the programme on culture and ethics at Barclays, it was like hitting a brick wall. Not long after, in 2015, Barclays was one of six global banks fined US$5.6 billion for rigging the foreign exchange markets. Foreign exchange traders had used chatrooms, with names such as 'The Cartel' to influence the value of major currencies. 'If you ain't cheating, you ain't trying' was the comment of one Barclays' trader in a chatroom. The bank had resisted a settlement that other banks had agreed with the US competition authorities and fought it to the end.
Barclays is a cautionary case of how to set about changing values... and then fail. It is a reminder of the saying that businesses don't have a culture - they are a culture. However, the lessons of the Salz Review at Barclays go deeper than how to avoid being caught up in the revolving doors of leadership. According to one person who was involved in submitting evidence to it, Douglas Board, the terms of review compromised the exercise from the start, because they were based on "the illusion of control".
The official aim had been to identify weaknesses in values and set them right, with stronger assurance methods to address deviation in future. This was as if Barclays was a home with a central heating thermostat that the Bank could control, adjusting as needed. But values and compliance doesn't work like that. With the scale and complexity of the bank, control by those in charge was not likely to succeed if it wasn't matched by the development of a constituency for change across the bank and the capabilities to sustain a more appropriate set of values. The Salz Review, says Douglas Board, was "giving the Bank ethical fish with varying (but not indefinite) sell-by dates, not teaching the Bank to fish ethically." Leadership on values, it turns out, is about facilitation, not instruction.
Of course there are banks that lead with their values, not always an easy path. Nationwide has an outstanding commitment to live up to its difference as a mutual, building society. There are smaller customer owned mutuals like the Ecology Building Society. And despite all the challenges it has faced, including the current round of further capital raising, The Co-operative Bank has an intelligent and imaginative Ethical Policy that has proved popular with its customers. Worldwide, there is growing Global Alliance of Banking on Values and moves towards a professional code of ethics for bankers. The Dutch bank ING makes all 90,000 employees take an oath to take into account 'the interests of all stakeholders'.
Banking has become something of a dirty word, but that is not something that is good for markets or society in the long run. We need banks and indeed we probably need more not less of them.
John Varley and his former colleagues who face prosecution have the right to a presumption of innocence. They will have their day in court. But I suspect that there is an underlying judgement that will emerge, however this plays out. If the business doesn't look after its values, it loses an asset that can be more costly than almost any other.
Values, as Simon Walker, the former Director General of the Institute of Directors, argues, are the next frontier in business. "Not so long ago," Walker says "the idea that corporations might hold core values would have been considered fanciful. Times are changing. In an era of radical transparency...values are now understood to be one of the foundations of successful companies."