In today’s Financial Times, a former investment bank CEO wrote a letter slamming the CEO of Barclays bank for continuing to be “held up at gunpoint” by bankers demanding higher pay.
It goes like this: The banker tells his boss that if he doesn’t get paid more, he’ll head to xyz competitor. The bank freaks out about losing talent — a phenomena sometimes called ‘The Death Spiral’ — and the banker gets his way. After a while everyone is doing it.
The former CEO who wrote the letter, Robert Pickering, says this whole thing a myth. It happened to him when he was a CEO, and he always managed to live without whoever left. Here’s the key paragraph. The full letter, picture above, was tweeted out by FT editor Lionel Barber.
I ran an investment bank for a number of years and was regularly held up at gunpoint and told that we had to jack up so-and-so’s pay to prevent him or her from leaving (usually for Goldman Sachs and invariably for “twice what they get here”). Sometimes I paid up and sometimes I didn’t, but the outcome in the long term was usually the same; people came and went, the business went through peaks and troughs but life carried on. In the febrile days of 2000, my predecessor was told that the very survival of our 200-year-old firm was dependent on the continued employment of a 20-something individual who had been in the industry for about 18 months. We offered him a partnership but he left anyway. A few years later, I reminded my senior management team of this incident and none of us, myself included, could remember his name.
The big rub with all of this is that Pickering is a Barclays shareholder, and the British bank isn’t delivering for him while still paying its top brass the big bucks.
Barclays has had a rough ride for the last few years — it was caught in the Libor manipulation scandal, went through a CEO change, and has simply not made money.
So it’s no surprise that there’s been a fair amount of outcry about the fact that its high-level bankers are still commanding massive salaries. The problem, Pickering says, is that this myth is ingrained in Wall Street culture, and that is always a very difficult thing to change.
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