The problems of being first

Barclay’s LIBOR scandal demonstrates the need for better media management in the finance industry 

No longer in the hot seat

 
Rather than discuss the morality of bankers or the reasons why one shouldn’t rig financial benchmarks; both of which are well documented elsewhere (often in an increasingly angry yet dull manner), this article discusses why the bank, which has proved itself so capable of adapting and profiting in adverse conditions, has failed so miserably in public relations. 

Barclays is one of many banks which have manipulated LIBOR. The tragic irony for Barclays is that had it been the only one fiddling the rate, they might have got away with it. If the other banks had presented honestly how much they were paying to borrow, Barclays’ shenanigans in manipulating borrowing costs would have been viewed as a mere outlier and left out of the average used by the British Bankers Association (BBA) to set LIBOR. 

Equally frustrating for Barclays is the contrast in PR management between themselves and the Bank of England (BoE). Though history may well take a dimmer view; seeing government institutions as often implicit in bad banking behaviour and even sometimes directly culpable; the British public have made up their mind. Scorn for big banks, indifference to the BoE. 

Barclays has suffered from being the first to admit involvement in the scandal. Agreeing to co-operate fully with regulators, before any of it peers, may have struck the bank’s PR team as a boon. It wasn’t. They should have recognised the negative public sentiment towards the industry. Being the first to come out almost always means incurring a disproportionate share of the nation’s wrath. 

Yet for all Barclays’ bad luck, it is difficult to see where the inauspiciousness ends and the ineptitude begins. Steve Gosset, writing in the Harvard Management Communication Letter, reckons once hit with a scandal, you have to “convey empathy”, or in layman’s terms, you have to act like you give a damn.  

For all their experience, CEOs of global companies have often proved themselves surprisingly incapable of doing this. Consider Tony Haywood’s pleas to have his life back after the BP oil spill; muse over Lloyd Blankfein’s comments that he was, “doing God’s work” at Goldman Sachs. 

Both Barclays’ ex-chairman and CEO can be added to this list. The resignation of the group’s chairman was rightly seen as a ploy to shade Mr Diamond from the heat of pubic animosity. The PR team should have thought this through strategically. Rather than being seen as a sacrifice, it was perceived to vindicate calls for Mr Diamond to go. If the chairman was leaving over this, then surely, the man responsible for the investment banking arm, the part of the bank that did the manipulating, should follow? 

Nothing added up, it further damaged the bank’s and its CEO’s reputation, already seen as toxic before the blunder, and ultimately, Mr Diamond’s subsequent resignation proved somewhat inevitable. 

It could be argued that no man has been quite so instrumental to building Barclays global credentials than its now departed CEO. Coming into the firm in the early 90s he masterminded the rise of Bar Cap. 

Not many would dispute Mr Diamond’s credentials as a banker, but as a CEO, he has not paid enough attention to the importance of public image. Mr Hester, boss of a rival firm, RBS, has managed to sculpt himself into an image of a fixer, here to set the wrongs of the credit boom. Understated, firm yet humble with critics, Hester has turned down bonuses and kept himself out of the public sphere. This has won him public indifference, which in the current climate, can be viewed as the highest possible assessment of any banker.  

Empathy and a low profile, Mr Diamond sorely missed. An American from the Investment banking division, the board should have seen it coming. Better to have kept him out of the limelight and making a killing at Bar Cap. 

Barclays is often said to have had a good crisis. Since 2007 it has managed to avoid a potentially disastrous takeover of ABN Amro, something RBS know all about. The bank also managed to make the most of Lehman’s demise, buying the defunct firm’s prime real estate and establishing itself as a global player. These achievements were realised by a combination of good luck and good strategy. Recent events suggest the bank may now be lacking both.