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NEWSLETTERS & ALERTS
Barclays CEO Jes Staley Skating on Thin Ice
By Howard Haykin
It took Jes Staley 34 years at JPMorgan Chase to establish his credentials to serve as chief executive of Barclays Plc. It’s taken him less than 2 years to wipe out much of his credibility. On at least four occasions, Jes Staley abused the power of Chief Executive or demonstrated questionable judgment.
- Staley Tried to Unmask a Whistleblower
- Staley Interceded in a Legal Battle Between His Brother-in-Law and KKR, a Barclays Client
- Staley Got Spoofed
- Staley May Have Entered into a 'No Poach' Agreement with JPMorgan
TRIED TO UNMASK A WHISTLEBLOWER. One year ago, in June 2016, Jes Staley tried to protect a colleague from what he believed to be an unfair personal attack. He did so by seeking to ‘out’ the whistleblower – i.e., he had the bank's internal security team contact U.S. enforcement officers for assistance in identifying the whistleblower. Such assistance was received, although the person’s identity was never discovered.
The bank board learned about the matter in January 2017; the public learned about it in April 2017. On May 10th, despite facing contentious opposition at the annual shareholders meeting, Staley was re-elected for another year as CEO - thanks largely to a reprieve from Barclays Chairman John McFarlane. That said, the Board plans to claw back some or all of Staley’s performance for 2016 – though no determination has yet been announced.
Meanwhile, Barclays and Jes Staley are being investigated by authorities in the U.K and the U.S. for possibly violating whistleblower protection laws - by the U.K.'s Financial Conduct Authority (FCA), the U.K.'s Prudential Regulation Authority, and the New York State Department of Financial Services (NYSDFS).
And, for what it's worth, I believe that Staley’s status is tenuous, at best, because...
- Staley violated laws and firm policy.
- Staley has weakened the firm’s whistleblower protection program because Barclays employees are now weary that they and their jobs will be protected if, and when, they seek to report a perceived wrongdoing in the firm.
- Staley abused the power of his office by demonstrating his belief that ‘might makes right’ - i.e., as CEO, his actions should be unemcumbered by others’ judgement or oversight.
- Staley damaged his credibility by choosing to act unilaterally – i.e., without first seeking proper counseling.
- Staley showed weakness as a CEO by allowing his actions to be driven by personally motives, rather than objective reasoning.
- Staley established himself as one who personally cannot be trusted, particularly with confidential information.
[see Financialish, 4/29 – “In Judgment of the Barclays CEO Who Tried to Unmask a Whistleblower”]
JES STALEY INTERCEDED IN A LEGAL BATTLE BETWEEN HIS BROTHER-IN-LAW AND KKR, A BARCLAYS CLIENT. According to people familiar with the matter, Jes Staley waded into a messy dispute between private-equity giant KKR &Co, and the brother of Jes Staley’s wife. It’s a matter in which Barclays had no direct or indirect interest – that is, until Jes Staley’s actions caused KKR to pull its sizable amount of business from the bank.
The Backdrop. In 2014, KKR invested $475 million in a deal to purchase a Brazilian data-center company, Aceco TI, which was founded in 1972 by the family of Jes Staley’s wife, Debora Nitzan Staley. Ms. Staley and her brother, Jorge Nitzan (who was Aceco’s CEO at the time of the deal), received about $160 million and $80 million, respectively, from the deal. One year later, Aceco was unraveling amid Brazil’s tumbling economy, and KKR is fighting a pitched legal battle in São Paulo to get its money back from Mr. Nitzan and the other sellers, that include Ms. Staley.
KKR’s beef with Mr. Staley is that he interceded on behalf of his brother-in-law, by trying to help find an investor late last year, after the 2014 acquisition went sour, and by vouching for him with KKR’s two big co-investors in the deal. KKR’s view, according to people familiar with it, is that Mr. Staley’s actions could have hurt KKR’s legal and financial options.
For his part, Jes Staley says he wasn’t acting in his capacity as Barclays’s CEO when he interceded for his brother-in-law, and that his actions in the dispute were what anyone would do to defend a family member. Appropriate "senior personnel" at Barclays are monitoring the situation. That said, while Barclays has earned $190 million in investment banking revenues
As a aresult of the disagreement between, KKR executives have cut Barclays off from some of their business - which is unfortunate because KKR has paid $190 million in investment banking fees to Barclays since 2010. My take-away is that the Chief Executive of a global bank should avoid getting personally involved in a matter that has nothing to do with himself or his employer, Barclays.
[See WSJournal, 5/2 - subscription required]
BARCLAYS CEO JES STALEY GOT SPOOFED. Having survived a contentious vote of confidence at the annual shareholders’ meeting held earlier that day, Jes Staley was no doubt relaxing and unwinding during the evening of May 10th. He was still CEO of Barclays - but only because Chairman John McFarlane had stood by his beleaguered executive. Staley understood that such support was not something to be taken for granted, given McFarlane’s reputation for ousting chief executives.
That evening, upon receiving an email from “firstname.lastname@example.org,” Staley accepted the email without "giving it a second thought" that it might have come from a prankster. So, having let down his guard, Jes Staley apparently disregarded the suspicious comments and references in the emails and readily engaged in a hearty and appreciative email exchange with “John McFarlane.”
To many, the incident spoke volumes about Jes Staley’s questionable judgment. It was, after all, at least the third egregious error on the part of the CEO of Barclays bank.
[see Financialish, 5/11 – “Barclays CEO Jes Staley Gets Spoofed”]
BARCLAYS ‘NO POACH’ AGREEMENT WITH JPMORGAN. The Justice Department is conducting a preliminary investigation into whether Barclays may have violated U.S. antitrust laws by entering into a “no poach agreement” with JPMorgan. While it’s unclear as to whether the DOJ is weighing a civil or criminal investigation, it’s understood that U.K. authorities will not take any action in this matter.
It all began with a string of recent high-level departures from JPMorgan to Barclays. It’s no coincidence that CEO Jes Staley, who joined Barclays in December 2015, had been with JPMorgan for 34 years and was viewed by some as an heir apparent to Jamie Dimon. The migration of executives between these banks was even highlighted in February 2017. (See “Nine Reasons to Leave JPMorgan and Join Barclays.”)
Anyway, the matter prompted JPMorgan Chair and CEO Jamie Dimon to call upon, and express his displeasure to, Barclays Chair John McFarlane who, in turn, had Barclays CEO Jes Staley reach out to Daniel Pinto, head of JPMorgan’s investment bank. Their discussions reportedly led to a “no poach” agreement, by which Barclays promised not to hire more JPMorgan bankers. Such an agreement would be illegal under U.S. antitrust laws.
[Financial Times, 6/15/17]