So what has the recent Barclays debacle and the Libor rate-fixing scandal taught us about brands and reputation?
First and foremost, it has shown us the importance of the role of the board. The board is there to protect shareholders’ interests. For any established organisation (private, public or third sector), what drives long-term success is the reputation of the “brand”. And this reputation should be of prime importance for a board.
What fascinates me about Barclays is that the board seemed to think more about the company’s reputation with its investors than with any other group of stakeholders. Yet investor reputation can only be sustained over the long term if a business protects its reputation with customers and, in the case of any regulated industry, its reputation with those responsible for such regulation.
The public’s trust in banks has been eroded and yet the banks’ boards seem unwilling, or perhaps unable, to address this. They seem to have bought the preposterous suggestion that there is only a very limited talent pool from which they can take their leaders and, having clung on to this, they feel they have no alternative but to keep faith with those who have so badly damaged shareholder (and customer) interests.
It’s quite clear that the board of Barclays should have dealt with the intangible poor performance (and, indeed, under performance) of its senior executives years ago. Not only did it fail to do this, it promoted into the role of chief executive a man allegedly willing to preside over an organisation that, in the words of Lord Turner, had “a tendency to seek advantage from favourable regulatory interpretations”.
For any established organisation, what drives long-term success is the reputation of the brand
A board is accountable for the leaders it appoints. It must hold them to account not just for the profit and loss account and the balance sheet, but also for intangibles: the talent pool, employee engagement and reputation.
As a senior executive and a non-executive, I’ve always been surprised by how unwilling boards are to hold leaders to account for the intangibles. I’m not so sure that boards are that good in holding leaders to account for financial, let alone for their non-financial, performance. If boards were really doing their job, why on Earth has chief executive pay exploded over the past 20 years?
Governance has become a process: one where the ticking of boxes is of paramount importance. As a director, I’ve been trained in countering bribery (to make sure we complied with the legislation), the peril of corporate manslaughter (yes, we’ve ticked that box too), and risk management (expert status in the mechanics of risk presentation). But I have never once been trained in holding anyone to account.
Yet as far as shareholders and other funders are concerned, I’m there to stand up for their best interests. As a director, I should look at every proposal, every action and every policy from the point of view of how it impacts on the reputation of the organisation.
As a non-executive, it is my decision, my approval and therefore my choice whether or not I support an executive leadership team. Yes, they should make a profit, return a surplus or manage a budget, but they should do so in a way that builds, not undermines, the company’s reputation.
A board only does its job well if it makes sure, through guidance, advice, counsel and ultimately the granting or withholding of its approval, that the executives act as good stewards of what is, after all, the investment of other people’s money.
Stewardship is a difficult, selfless role. The best stewards build value. Many of those who ran our banks did not act as stewards. Worse still, they were neither held to account nor challenged nor confronted by those we trusted to protect our interests as owners of the capital employed.
Barclays is a great brand with a reputation so sullied that many of us won’t want to give it our business for a very long time. The lesson for boards is clear: when the emperor has no clothes, be the first, not the last, to tell him.
Chris Bones is professor of creativity and leadership at Manchester Business School, and author of The Cult of the Leader; he is also an independent non-executive director of the Agricultural and Horticultural Levy Board, a non-executive director of The Working Manager, and co-owner of Good Growth.
