Categories: Credit Crunch / Crisis management

25 November 2008

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The Barclays battle and the lovely new PR war

Yesterday Barclays Bank won the vote to endorse its billions of Arab fund-raising. Its board was attacked from all sides, even by those voting for the deal. Welcome to the world of recession business. Clients are going to have hard cases to sell. That’s our real job. It’ll be exhilarating.

A PR’s heart is bound to leap when it reads the Barclays story. What an opportunity at last to stop schmoozing a soft-line to all comers.

There was no talk of aligning the values of employees, consumers, shareholders and other stakeholders. There was no talk of mutual social responsibility either. What was on offer was a take it or destroy it option. TINA was the Board’s message (There Is No Alternative). The board wasn’t playing nicely. George Dallas, corporate governance director at F&C Investments, told the meeting:

“We deeply object to being put into a position where the consequences of voting against this deal would make a bad situation worse.”

No wonder Barclays needed security guards to hold back shareholder anger when both retail and institutional investors were losers in an unprecedented fund raising exercise. Its chairman Marcus Agius expressed regret for the mess without backing down. Hence, nobody can accuse Barclays Bank’s board of lacking courage or leadership.

It has laid itself and its bank’s future on the line. It had the balls to reject the government offer of the taxpayers’ shilling because of the strings attached. Instead it sought more expensive capital elsewhere. In the process it shocked, indeed horrified, its existing stakeholders. But these are extraordinary times. The bank had few choices, it said (unlike Standard Chartered). There was no time for niceties. This was about securing long term survival, it argued. There were few advantages in going down the route of the near-nationalised banks, it said. What a narrative! We’re coming out fighting! We’re not giving in! We’d rather dangerous and costly independence than sucking on the state’s wet-nurse teat like babies!

The resistance won a few concessions – rather than a U-turn. Shareholders did take action to defend their interests as they saw them. The board was forced to reonounce its bonuses this year and next and put itself up for re-election annually.

It can be argued – and the FT has – that Barclays’ board is more accountable and more prone to listen to its shareholders than before. Perhaps had shareholders been less satisfied and more active over the last ten years the financial sector would be in better shape now. The period before – a period of boom in which many assumed bust would never reappear – was characterised by a complacant and meaningless consensus, with fake accountability and translucent transparency. Otherwise, we wouldn’t have got in to the credit crunch in the first place.

Barclays Bank will have to repair its relations with its shareholders. The board’s reputation will need nurturing. But this time around the whole process will be more volatile, more democratic and honest than what we witnessed during the amazing aberration of the last boom.

The wider PR lessons are that there will be far more different – and angry – messages flying around. Our clients are going to be fighting harder for much more differentiated positions which are sharper-edged. The arguments will be fiercer, more aggressive, less obvious.

We will have to accept that not every difference is reconcilable and not every stakeholder is going to be a winner.

Yesterday Barclays share rose by almost 10 percent. While, Standard Chartered shares fell 34½p to 725p.

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