Business

Barclays CEO falls on sword

Wednesday, July 04, 2012    

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LONDON — He was a poster boy for corporate arrogance, telling Parliament last year that the time for bankers to apologise had passed.

Now Bob Diamond is just the latest victim of growing public anger at a British establishment they regard as greedy and ethically challenged. Bankers, politicians and journalists have all felt the full force of the growing disdain at a time of economic troubles.

The hard-driving CEO of Barclays bank resigned yesterday, buckling under massive media pressure and a few none-too-subtle hints from top politicians that his days at the top should be numbered.

In the few short days since Barclays was fined US$453 million for its role in the LIBOR interest rate fixing scandal, Diamond, an American with a stratospheric pay package, came to symbolise everything wrong with international banking.

"He became a public enemy," said George Jones, professor emeritus of government at the London School of Economics. "I think the media likes to have personalities they can make into villains. The public can understand that. They can't understand all this talk about LIBOR rates, but they know it was underhanded and the bankers made money."

Diamond has been in the limelight before. Two years ago in response to a furor over bankers' pay, Peter Mandelson, a senior government minister under the previous Labour government, branded Diamond "the unacceptable face of banking."

And earlier this year, he felt the heat from shareholders, with holders of 27 per cent of the company's shares voting against his pay package. Diamond soothed the anger somewhat by agreeing to make half his bonus contingent on meeting performance targets.

Diamond is not the first prominent, and wealthy, banker to infuriate Britons since the financial crisis started five years ago. And he has the comfort of not being the most reviled -- that dishonor falls to Fred "The Shred" Goodman, the CEO who led Royal Bank of Scotland to near-ruin and an eventual taxpayer-bailout after it outbid Barclays to take over Dutch bank ABN Amro.

Goodman resigned, taking away US$25 million in pension benefits. In January, following another public outcry, the government stripped Goodman of his knighthood.

Diamond's resignation comes just a day after Barclays chairman Marcus Agius announced his intention to resign Monday. Though Agius said the buck stopped with him, there was no let up in demands for Diamond to quit, too. He was after all the man in charge at the investment banking division at the heart of the scandal at the time.

Diamond leaves Barclays a bigger beast than before -- he led Barclays in scooping up the remains of Lehman Brothers' U.S. operations at a bargain price of US$1.35 billion in 2008.

However, he leaves a bank very different in nature.

"I thought he was a swashbuckling entrepreneurial character, self-made," said Allister Heath, editor of the daily financial newspaper City AM. "He's American, a workaholic, wants to win, wants to become rich. Not ashamed of money. Barclays has been rebuilt in his image."

Barclays officials said Desmond earned about US$10 million in 2011, calling BBC reports that he was paid about US$32.8 million greatly exaggerated.

Last year, with Britain's economy still struggling in the aftermath of a global banking crisis, Diamond told a Parliamentary committee: "There was a period of remorse and apology for banks. I think that period is over."

The attitude toward bankers, including Diamond, was summed up yesterday in a large-type Guardian newspaper headline: "Ever Get the Feeling You've Been Cheated?" it read.

Robert Edward Diamond Jr, always known as Bob, is a native of Concord, Massachusetts, one of nine children. He joined Barclays in 1996, and eight years later he was put in charge of Barclays Capital, the investment banking unit.

Diamond, 60, prospered while other bank executives were losing their jobs in the industry crisis of 2007 and 2008.

He said Tuesday he was stepping down to protect Barclays from further damage.

Martin Taylor, who was CEO of Barclays between 1995 and 1998, said last week that he didn't believe Diamond had approved any wrongdoing in the bank, but that he had led a culture prone to risk.

"Bob runs an extraordinarily competitive and aggressive ship, and that is one reason why Barclays Capital has been very successful in the first decade of the century," said Taylor, who credited Diamond with a strong following inside Barclays.

"And I think that when people are pushed to go to the limit, you know what traders are like, they sometimes go beyond it. They don't need to have an instruction from headquarters to go beyond it; they think it is what the bank might expect."

Britain's Serious Fraud Office said Monday that it would decide within a month whether to pursue criminal charges in the case. The government, which has come under pressure to initiate a judge-led inquiry into the sector, also announced a parliamentary committee to investigate what went on and report by the end of the year.

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