Practical analysis for investment professionals
10 July 2012

Leadership Roundup: Lessons from the Barclays Scandal

As you may have noticed, Barclays (BCS:US) was recently fined a record £290m/$450m by U.K. and U.S. authorities for attempting to manipulate the London interbank offered rate (Libor). As reported by the Financial Times, this settlement is the first in a probe launched by the U.S. Commodity Futures Trading Commission that now spans nearly a dozen regulators and more than 20 banks, and the continuing investigations are expected to set a basis for settlement negotiations with individuals and other institutions.

So, what went wrong? Two types of misbehavior in relation to Libor seem to be apparent from the investigation: from 2005–2007, the bank took requests from its own traders as well as those at other banks into account when making submissions and has also admitted to lowballing its Libor rate submissions in order to paint a rosier picture of its financial health after the collapse of Northern Rock (NRK) in the UK and Lehman Brothers (LEH) in the US. Only months after coming under fire from investors over his pay for 2011, Barclays’ CEO, Bob Diamond, along with three of his key lieutenants, announced plans to waive their potential bonuses for the year in response to the fine, and Diamond’s apology as quoted in the FT was, “I am sorry that some people acted in a manner not consistent with our culture and values.” Shareholders and political figures began clamoring for Diamond’s resignation, and former CEO of Barclays, Martin Taylor, said the bank’s actions amounted to “systemic dishonesty” and commented that the bank must rebuild its reputation following the scandal.

The latest development in this rapidly unfolding story is Diamond’s publicly announced resignation, which UK politicians and regulators have hailed as the “first step towards a new culture of British banking.” Admitting to and taking personal responsibility for wrongdoing is often the first step in the process, but it looks like both Diamond and Barclays have a long way to go in terms of restoring trust. Leaders, particularly CEOs, have a clear obligation and responsibility in setting the tone for the culture of their organization; perhaps Diamond’s key lesson from this experience (and his successor’s challenge) is to truly understand the role he should have been playing in transforming Barclay’s culture.

Here are some other must reads on leadership, innovation, and communications skills you may have missed in June:

For more news and trends, visit the Leadership, Management, and Communication Skills Community of Practice.

About the Author(s)
Heather Packard

Heather Packard is the director of product development at CFA Institute and serves as the subject matter expert in leadership, management, and communication skills (LMCS). Previously, she was the managing partner at Trilogy Corporation of Virginia, where she was responsible for developing and cultivating a regional territory for telecommunications and network integration sales. Packard also served as the coordinator of collections for the Science and Engineering Libraries at the University of Virginia. She holds an BA in English and Spanish Literature from the University of Tennessee, Knoxville, and an MA in Spanish Literature from the University of Virginia. Topical Expertise: Leadership, Management, and Communication Skills

1 thought on “Leadership Roundup: Lessons from the Barclays Scandal”

  1. Ritesh says:

    Quite good article.

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