Barclays CEO Jes Staley participates in the Yahoo Finance All Markets Summit at Union West on ... [+]
The resignation earlier this week of Jes Staley as CEO of Barclays Bank—apparently because of issues related to his ties with the late convicted sex offender Jeffrey Epstein—made international headlines. For business leaders, Staley’s sudden departure and the still unfolding story behind it could prompt concerns and questions about issues in their own pasts that, though assumed are dead and buried, could unexpectedly come back to life.
Coming as it did the day after Halloween, Staley’s sudden quick exit raised the ghosts of other stories that have been in the news about the resignations of high-profile individuals, investigations into the backgrounds and conduct of company executives and publicized scandals involving influential people.
Unanswered Questions
It is not yet clear where on the crisis continuum the Barclays-Staley crisis stands—at the end of the beginning, the beginning of the end, or somewhere in between?
This story follows a familiar pattern in such crisis situations: allegation, investigation and resignation. What’s missing though—so far—are answers to some key questions. The answers could end the crisis—or possibly prolong it.
- What exactly did the investigations find?
- What did the government investigation find that others had missed?
- Why haven’t the complete results of the investigations been released to the public? When will they? Or will they?
- Why does Staley think it is necessary to contest the findings?
- Did Staley leave on his own accord, or was he pushed?
As of this writing, Staley and Barclays both appear to be following established best practices for responding to a crisis—up to a point. For his part, Staley shared his point of view about the situation with reporters. Although Barclays issued a detailed statement about the matter, some portions—such as the results of the investigation—raised more questions than they answered.
Staley’s Statement
According to the BBC, “Mr. Staley admitted he maintained contact with Epstein, who died in [a] New York prison cell last year, for seven years after his conviction.
"It has been very well known I had a professional relationship with Jeffrey Epstein," Mr. Staley told reporters. "It goes back to 2000 when I was asked to run the JP Morgan private bank and he was already a client when I joined the private bank.
"The relationship was maintained during my time at JP Morgan but as I left JP Morgan the relationship tapered off quite significantly. Obviously, I thought I knew him well and I didn't. For sure, with hindsight with what we know now, I deeply regret having any relationship with Jeffrey. "
Statement From Barclays
On Monday, Barclays issued a lengthy (945 words) statement detailing its version of the situation and announcing Staley’s successor. The statement covered the following major topics:
Timeline Of Events
“Barclays and Mr. Jes Staley, Group Chief Executive, were made aware on Friday evening of the preliminary conclusions from the FCA [Financial Conduct Authority] and the PRA [Prudential Regulation Authority] of their investigation into Mr. Staley's characterization to Barclays of his relationship with the late Mr. Jeffrey Epstein and the subsequent description of that relationship in Barclays' response to the FCA.”
Actions Taken
“In view of those conclusions, and Mr. Staley's intention to contest them, the Board and Mr. Staley have agreed that he will step down from his role as Group Chief Executive and as a director of Barclays.”
Putting Things In Perspective
“It should be noted that the investigation makes no findings that Mr. Staley saw, or was aware of, any of Mr. Epstein's alleged crimes, which was the central question underpinning Barclays' support for Mr. Staley following the arrest of Mr. Epstein in the summer of 2019.”
Board’s Reaction To Events
“The Board is disappointed at this outcome. Mr. Staley has run the Barclays Group successfully since December 2015 with real commitment and skill.”
Giving Credit Where Credit Is Due
“Supported by the senior team which he largely helped build and on whom the Barclays Group will be relying for the future, Mr. Staley clarified the Barclays Group's strategy, transformed its operations and materially improved its results. The regulatory process still has to run its full course and it is not appropriate for Barclays to comment further on the preliminary conclusions.”
Perceptions Are Important
Brian Hart is a financial services communications strategist and founder of national public relations agency Flackable.
“From a PR perspective, the biggest problem for Staley is that he was being investigated for potentially lying to investigators about his relationship with Epstein. It is inconclusive if he did lie, but because of the magnitude of the situation, even the smallest perception that he may have lied is hugely problematic,” he said.
The Right Thing To Do
Hart observed that, “For Barclays, they did exactly what they needed to do. They put out a statement addressing the situation and they cut ties with Staley immediately. Because they got out in front of the crisis and are no longer affiliated with the individual, they properly handled the situation and don’t need to linger on it.
“The other positive for Barclays is that if they unintentionally gave investigators false information because it was provided to them by Staley, they added a layer of protection because they cut their ties with him,” he noted.
Ironies, Twists And Turns
This crisis does have some unusual aspects that others often lack.
Staley’s Past Ties With Epstein Was Old News
The BBC reported in February 2020 that “Barclays boss Jes Staley said he ‘deeply regrets’ his connection with sex offender Jeffrey Epstein. His comments come after Barclays revealed that UK regulators are investigating the chief executive's links with the disgraced financier.”
Staley Originally Had Barclays’ Support
The Financial Times reported that, “Until last week, [Barclay’s board] had been steadfast in its support of Staley, despite him only narrowly surviving an earlier probe into his improper campaign to unmask a whistleblower, ignoring the advice of colleagues and in breach of the bank’s rules.
“Directors hired external lawyers to conduct a review of how he had characterized the relationship with Epstein, which concluded he had been “sufficiently transparent” with them and regulators.
Advice For Business Leaders
Succession Planning
Tom C.W. Lin is a business law professor at Temple University Beasley School of Law and an Academic Fellow at George Washington University’s Center for Law, Economics & Finance. He observed that, "The sudden resignation of Jes Staley from Barclays and the swift ascension of CS Venkatakrishnan highlights the importance of succession planning in business.
“In today's rapidly moving marketplace, boards must have well thought-out contingency plans in place for the sudden loss of key personnel. Sound succession planning is critical for modern crisis management. When investors entrust their money in a business, they are not only investing in the operations of that business but also in the leaders of that business. The impact of Stanley's sudden resignation was mitigated by quick action by the board in naming a successor."
Be Prepared For A Crisis
Chester Spatt, professor of finance at Carnegie Mellon University's Tepper School of Business. He said Barclay’s crisis, “… illustrates a variety of aspects of crisis management. It is important for firms to be prepared for crises and ideally to be in front of them.
“The situation also illustrates the extreme importance of the regulators of financial service firms—one cannot have a CEO in whom the firm’s regulator lacks confidence. To have such a CEO sets the stage for a crisis,” he observed.
