Managers are notorious for prioritising short-term demands when they clash with long-term goals. Research in the US has shown that most executives would shy away from a value-enhancing long-term project if it caused them to miss a quarterly earnings forecast.
How companies can manage such clashes was the subject of a “Strategy Live” debate organised by the Financial Times in London this morning. Chaired by management editor Andrew Hill, the session featured senior figures from finance and industry, who spoke on a non-attributable basis under the Chatham House rule.
Participants used the example of Barclays to launch a broader debate, examining its controversial decision to increase bonuses to its investment bankers even as it – seemingly paradoxically – tried to move to a less abrasive, more long-termist culture.
Antony Jenkins’ efforts to change the culture of Barclays by cutting bankers’ pay are on hold. At its investment bank, it is paying bonuses that are 13 per cent higher to “compete in the global market for talent”. The bank’s chief executive wants to reform the pay of US and Asian investment bankers but it is beyond his contro
There was something familiar about reports that a German cleric dubbed “the bishop of bling” had spent €15,000 on a bathtub for his palatial new residence. The Pope has now suspended Franz-Peter Tebartz-van Elst, Bishop of Limburg, while his home improvements are audited. There is no evidence the bishop has done anything wrong, let alone illegal. But the affair brings back memories of disgraced Tyco chief executive Dennis Kozlowski’s notorious purchase of a $6,000 gold-and-burgundy floral-patterned shower curtain, using cash and loans from the company.
You’re about to hear a lot more about “good banks” and “bad banks”. The report from the parliamentary banking standards commission, due on Friday, and Stephen Hester’s departure from Royal Bank of Scotland will reignite questions such as whether RBS should be split into “good” and “bad” operations (Mr Hester opposed this).
Running in parallel is a philosophical debate about how you ensure banks are “good” – in the sense of having a strong, positive purpose.
But there is also the question of whether banks that do good are always good banks.
Antony Jenkins, new chief executive of Barclays, and Rich Ricci, chief executive of corporate and investment banking, have said the right thing. Can they now do the right thing?
The rhetoric of their speeches to analysts on Monday was fine. Mr Jenkins said Barclays would “operate to the highest ethical standards. It will be balanced, less risky and more profitable”. Mr Ricci expanded on this:
We have always scrutinised our businesses based on their ability to generate returns, with careful evaluation of risk and controls embedded in that analysis. Now however, I feel it is appropriate to modify that assessment by explicitly looking at reputational risk as the first hurdle. We have to take a fresh look to see if there are products and services in which, given the changing environment, we no longer deem it appropriate to do business, regardless of financial return.