But Barclays’ new CEO-designate, John Varley, has spent much of the time since his promotion was announced last month responding to criticism of Barclays’ corporate governance practices.
The bank’s board chose the 47-year-old finance director to succeed Matthew Barrett in January 2005, when Barrett is due to assume the chairmanship from Sir Peter Middleton, who is retiring. Institutional shareholders’ groups, including the Association of British Insurers, wasted no time in demanding that the bank offer a convincing, public explanation as to why it elevated its CEO to the chairman’s post. “They’re doing something that is a big concern,” Peter Montagnon, the insurers’ association’s investment manager, says of the Barclays board. “It makes it very hard to make sure that the board has appropriate oversight.”
Varley, for his part, tells II that he doesn’t see Britain’s new corporate governance code as a straitjacket: It merely requires companies to either comply with its rules or explain why they do not intend to do so. “An ‘explain’ decision is just as legitimate as a ‘comply’ decision,” he says. In Barclays’ case, Varley contends, the explain option applies. He says that Barrett, a Canadian, is “uniquely qualified” to serve as chairman because of the knowledge he’s gleaned over four years as CEO as well as his previous experience as chairman of Bank of Montreal. “It was self-evidently the right decision,” says the CEO-to-be.
Montagnon doesn’t question Barrett’s bona fides. Nonetheless, he urges institutional shareholders to be vigilant because of Barclays’ insider succession.
The chairman flap isn’t the only problem Varley will have to address. One of his rivals for the CEO job was Bob Diamond, the American who built Barclays’ successful investment banking unit. Speculation abounds that Diamond may now leave. “He’s operating right at the top of the investment banking industry,” says Varley of his erstwhile rival. “He has been hugely successful at developing the business. But he is one member of the team.”
As for Varley, the bank is practically in his blood. The scion of a prominent line of solicitors, he married a member of the Pease family, which sold its bank to Barclays in 1902 and maintained a seat on the board into the 1980s. The Oxford grad got his first job at the bank after his father-in-law, Sir Richard Pease, put him in touch with Lord Camoys, who ran Barclays’ merchant bank.
“I wouldn’t have looked at Barclays were it not for his saying, ‘This is an interesting organization,’” Varley says. “That was my good fortune.”
