April 10, 2017 / 11:15 AM / 6 months ago

Jes Staley's "honest mistake" still hurts Barclays

LONDON (Reuters Breakingviews) - Jes Staley has put his foot in it. Barclays’ chief executive will get a pay cut after he tried twice last year to unmask a letter-writing whistleblower who impugned the character of a recent recruit at the bank. The error may seem morally defensible: Staley wanted to defend a colleague from what he saw as unfounded smears. But it doesn’t say good things about Barclays’ internal processes.

Chief executive officer of Barclays, Jes Staley, takes part in the Yahoo Finance All Markets Summit in New York, U.S., February 8, 2017. REUTERS/Lucas Jackson

Protecting those brave enough to second-guess management is vital, if whistleblowing is to act as a plausible check on financial wrongdoing. UK politicians acknowledged as much following the financial crisis. Despite a recent toughening of its regime, British regulators have ruled out U.S.-style financial rewards. Turning informant remains fraught with peril, and is more often described as career suicide than noble deed. In that sense, Staley’s punishment should help.

Still, Barclays is fortunate that at least one of the authorities investigating doesn’t think bosses should have to go for “honest mistakes”. Bank of England Governor Mark Carney used this phrase to describe former Deputy Governor Charlotte Hogg’s failure to declare a potential conflict of interest over her brother’s employment at, ironically, Barclays. A public outcry forced Hogg to resign anyway, but “the Hogg defence” provides banks with helpful cover.

In one sense, Staley’s failings are more serious. While Hogg’s sin was one of omission rather than commission, the Barclays boss actually attempted to influence the course of an administrative process from which he should have recused himself. Had he succeeded, it may have cowed other Barclays whistleblowers from coming forward. As it was, his two efforts to identify the tipster failed.

A partial exoneration is that Staley’s witch hunts were undertaken because he didn’t appear to understand whistleblowers’ right to be protected. Hogg had no such defence, since she had recently overseen an overhaul of BoE guidelines on conflicts of interest.

Yet given Staley should have known the rules, it reflects badly on him. It also looks bad for Barclays: the incident only came to light as a result of a separate complaint about the bank’s whistleblowing regime this year. That suggests more profound failings. A board-instigated review of the related procedures feels like too little, too late.

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