Investors let Barclays down
BARCLAYS is heading towards a huge showdown with American corporate raider Edward Bramson at its next annual meeting, in a damaging confrontation that need never have happened, if only the bank’s City shareholders had been doing their job properly.
Bramson is what is known in the trade as an ‘activist investor’, which is itself a revealing term, as all investors ought to be activist in the sense of taking a close interest in how companies are run.
He grabbed a 5.5pc stake in Barclays – most of it bought with a £1bn loan – and used it to demand a seat on the board so he can steamroller through his plan to scale back the investment banking arm.
The bank correctly says he should not be allowed a seat because he would be ‘disruptive and uncollaborative’, though these are adjectives that could have been applied to more than one previous director that Barclays appointed of its own volition. Bramson
has a point, because the share price performance of Barclays has been utterly useless: before the credit crisis it was above £7 but now is £1.69. Whether investment banking is at the heart of the malaise, however, is a different question.
True, the so-called ‘casino banking’ arm is a source of volatility and risk but, at the same time, it provides profit potential when there are question marks over how much growth can be extracted from personal and business services.
My suspicion is that whatever the theoretical benefits of a split, the reality would be rather like Brexit, in that it would be a logistical nightmare to disentangle a business that has been an integral part of the bank for such a long time.
In any event, it is hardly a new issue. A debate has been going on for decades about whether Barclays should carry on with its investment banking operations or try to hone them down. However critical one might be of Barclays top brass, one has to assume the board didn’t need Bramson to come along and draw their attention to such a blindingly obvious issue.
The signs are that Barclays’ largest shareholders will refuse to back Bramson, which is all to the good, but they emerge with no credit. What does not seem to have occurred to them is that they themselves should have been working with the bank to sort out the underperformance.
The future of Barclays really matters: it has 30,000 staff, 24m UK customers and its shares are held by millions of people through their pensions and ISAs.
We, through our savings, are the ultimate owners of the bank. The City institutions hold the shares on our behalf and have a responsibility to us all to make sure executives are pursuing the right strategy.
If this highly paid crew were less passive, there would be no scope for characters like Bramson to insert themselves.
Their dereliction of duty has left one of our most important banks at the mercy of an American opportunist whose Guernseybased firm could pocket £100m in fees if he muscles his way onto the board.
Uber float
On the subject of shareholder folly, the floats of Lyft, Pinterest and the forthcoming Uber listing in the US are reminiscent of the last tech bubble.
Uber, which admits it might never make a profit, could be valued at as much as $100bn when it makes its debut on the stock market in a few weeks.
Speaking as a new customer of the ridehailing service, I’m delighted that shareholders are happy to subsidise me as I zip around in a cheap and convenient car, whilst the firm runs up big losses. Investors should steer clear, but customers should download the app and enjoy the ride.