Jena McGregor is a columnist for the Washington Post’s On Leadership section.
The reputation of Barclays bankers took a beating this summer after a rate-fixing scandal dominated business headlines. The company’s role in the controversy, which involved charges of rigging a key interest rate called LIBOR, prompted the exits of the its chairman, CEO and chief operating officer, all within a span of two days.
New CEO Antony Jenkins is trying to turn things around, at least in part, by changing the company’s incentive structure.
Employees had been notified recently that “a refreshed set of values and behaviors,” according to an internal memo, would be considered when determining bonuses for company leaders. And then on Sunday, Jenkins said in an interview at the Clinton Global Initiative that employees will be paid in part based or whether or not they’re acting as “good citizens,” according to Reuters. It reported that in the next six to 12 months, Barclays will devise a “balanced scorecard” that measures several factors of employees’ performance, including how their actions “affect the environment” as well as a “citizenship” component.
My cynical side can’t help but wonder if Barclays—or any other major bank—would ever do such a thing if its reputation hadn’t been tarnished in a major banking scandal. And I’m not the only one: The news was met with smirks from others who watch the industry. (“Breaking the speed limit in a school zone, for example, will cost you a couple mill, while volunteering with your local Boy Scouts chapter to help the troops earn their ‘Libor Manipulation’ badges will translate to a few extra zeros on payday,” Dealbreaker’s Bess Levin joked.) It makes good sense, sure. Yet it makes even better P.R.
But once you get past the reputation rehab, it’s hard not to see the value in Jenkins’ move. To reward people solely for their business performance and not consider their impact on the rest of society is short-sighted and narrow. If people are motivated by incentives based simply on dollars and cents, they are going to focus simply on making those dollars and cents. And if those rewards are particularly handsome—or obscenely high, as they can be in the case of the banking industry—the temptation to ignore everything else is just that much stronger.
Of course, the devil will be in the details. Jenkins did not explain to Reuters how, exactly, he plans to get his company’s “leadership population” to pay enough attention to being good citizens. How much of the “balanced scorecard” will be based on shareholder returns vs. societal good? How will these new goals be measured—by simply staying out of trouble, or actually producing tangible results that better society? And how exactly does one measure that? Will the new metrics mean ramping up micro-loan programs in developing countries or actually divesting the bank of questionable business practices? (It just might: the bank is apparently planning to scale back some business lines, such as advising clients on avoiding taxes, “regardless of financial return,” the company’s investment banking chief has said.)
Whatever the context, Jenkins’ bonus system is laudable, if tricky to implement. It may take a crisis to force it to happen, but restructuring incentives is a good first step toward changing an organization’s culture. Bankers may not turn into Boy Scouts overnight. But revising rewards is necessary if the industry’s leaders are ever going to keep the finance world morally straight.
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