Dr Pamela Yeow, Lecturer in Human Resource Management and Deputy Director of MBA Programmes, Kent Business School, University of Kent comments on – Barclays to review ‘flawed’ practices as Agius resigns http://www.bbc.co.uk/news/uk-18669834, and Barclays boss Bob Diamond resigns amid Libor scandal http://www.bbc.co.uk/news/business-18685040
The Barclays Bank Chairman Martin Agius resigned days after the LIBOR scandal broke when Barclays was fined £290m for trying to manipulate interest rates at which banks lend to each other.
Will his resignation protect the bank from more damage to its reputation? Or will it be viewed as a token gesture – where the leader takes the hit, to protect his people? Trust can be directed towards a group, an individual, or an organization. Public trust is the degree to which external stakeholders such as the public, hold a collective trust orientation toward an organization (Poppo and Shepker, 2010). But is it possible to trust an organization, seeing as the organization does not in fact display trustworthiness; it is the members who do so, through interactions which are sanctioned by and embedded in the organizations’ systems? Does this resignation detract from getting to grips with the root of the problem and taking to task the individuals, directives and policies that have, in the public’s eye at least, led to immoral behaviour? It is commonly the case in organisational failings that senior parties deemed responsible for the violation are removed (or remove themselves) from the organisation as a mechanism to rebuild trust (Dietz and Gillespie, 2009) but it is unclear to what extent this actually impacts public perceptions of trust in the organisation.
GLOBE studies have found that trustworthiness is an integral part of outstanding leadership across all cultures. Companies reported to have high trust levels in leadership report a three year return to shareholders of 108%; in low trust companies, the returns have been as low as 66%. The role of the leader is indeed crucial in maintaining trust levels especially during periods of turmoil and crisis. It is whether the leader is trustworthy, that might make or break this Barclays scandal.
The public as well as some members of the government and other senior post holders in the banking industry have called for the resignation of Bob Diamond, the Chief Executive. Till today, he has been adamant that he will stay on to clear up the mess. It was widely suggested that he was the best person to be able to sort out this mess; however will he be able to restore back the trust his customers had in his institution? It seems not, as the story broke this morning of his resignation too.
What Barclays needs now, if it is to survive as a credible organization is a restoration of its reputation, its credibility and a refocus on good practice.
Barclays appears to be the tip of the iceberg, with other large banking institutions being investigated. If institutions such as Barclays fail to rebuild trust, it may not just be Barclays that is in danger of sinking, but they’ll take with them other major players in the banking industry.
View Dr Yeow’s previous comments on the Barclays issue.