Barclays pays a heavy price for the knights with the long knives

Martin Taylor, erstwhile chief executive of Barclays Bank, is close to the Government. He has, among other things, been consulted on the working families’ tax credit. There is talk of a peerage.

With this exposure to New Labour principles, it is perhaps unsurprising that he resigned from his job just as soon as it became untenable. Not for him the old Tory style of hanging on to office at all costs, until circumstances force a departure. Tony Blair, who Taylor introduced to Microsoft’s Bill Gates and who is said to value Taylor’s “helicopter intellect”, is known to favour swift and clean resignations, as Ron Davies would confirm.

No sleaze, of course, in Taylor’s case, but plenty of politics. In a remarkably well informed piece in the Financial Times this week, Hugo Dixon recorded how the four knights on Barclays’ board – Sir Andrew Large, Sir Peter Middleton, Sir Nigel Mobbs and Sir Nigel Rudd – played key roles in Taylor’s departure through the course of four key events. These were the sale of BZW’s sales and advisory business through public auction last year, the appointment and subsequently frustrated ambitions of Large, the Russian crisis last August and a board meeting in October, at which Taylor outlined his plans to split the retail and corporate businesses.

Falling out with your board is an occupational hazard for chief executives, but resigning on the spot from such a high-profile listed company is something of a new departure, as it were. In corporate governance terms, the immediately cleared desk will be greeted with mixed feelings.

On the one hand, there is a respectable transparency to such a move. The chief executive has parted company strategically from his board and, therefore, must part company physically too. But in an already bruising market for the bank’s shares, shareholders will not have welcomed a move that wiped eight per cent off the value of Barclays at a stroke and can be expected to force the quote lower if a replacement is not found swiftly.

At arch-rival NatWest, relations have been far from easy over the past couple of years between members of a board presided over by chairman Lord Alexander and chief executive Derek Wanless. They have largely succeeded, however, in keeping their dirty linen off the public washing line.

And, in any event, the causes of Taylor’s abrupt departure are far from clear. The usual weasel words about the time being right to hand the management over to someone else fool nobody and undermine the quality of Taylor’s decision to go. The Hampel committee on corporate governance argued that shareholders should be let in on the arguments that lead to resignations such as this, not fobbed off with some politburo guff.

All in all, Taylor is to be applauded for a brave move in keeping with the political times of personal accountability and his former colleagues should be admonished for stifling the corporate governance that led to it. In the long term, institutional investors are likely to welcome chief executives who are willing to carry the can, but are unlikely to be impressed by it being carried behind closed doors.

The question now arises whether the helicopter-minded Taylor was the right man for the job. He wanted to split retail and corporate banking as businesses, possibly merging them into UK and continental banks respectively. I don’t suppose that Taylor would claim that you have to be particularly helicopter-minded to spot that corporate and retail banking have grown apart and should be enabled to go their separate ways.

Corporate banking is an increasingly demanding business. These days, profitable companies don’t really need it. When corporate earnings start to fall, modern corporate banking comes into its own. The next 12 months will sort some of the wheat from the chaff in this regard.

Retail banking, meanwhile, grows increasingly like a commodities market. Or, rather, like branded comestibles. The entry of supermarkets such as Tesco and Sainsbury’s to financial services isn’t co-incidental in this context. Financial services come increasingly off the shelf and the customer inertia that old financial institutions relied upon will not stand up to competitive aggression.

It follows that the old high street banks cannot continue to be all things to all markets. They may be able to be all things to certain markets. With a Government intent on tearing up the treaty that the financial services industry had drawn up with the investing public over the past decade, the focus will, in any event, have to be on fragmentation.

Banks will have to recognise that they’re not in the fast-moving consumer goods market. With the likes of the supermarkets on the financial services case, not to mention those who are deploying the Internet in consumer financial markets, the banks are going to have to discover what they’re good at and go for it.

I suspect that this is what occupied Taylor’s helicopter mind. There are plenty of banking backwoodsmen who will continue to believe that banks have a divine right to earnings from an amorphous mass of services. They frustrated Taylor; and they’re wrong.

But, if rumours are true that Keith Oates, a prime mover in the recent ructions at Marks & Spencer and a force behind the M&S chargecard, is interested in the Barclays job, the knights of Barclays have a chance to make amends to their shareholders and should seize it.


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