Governing values Presentation to the City Values Forum: Integrity Matters conference Oonagh Harpur and Tony Manwaring Tomorrow’s Company

To date:  Interviewed 28 chairmen, non-executives, CEOs, company secretaries and general counsels  Interviewed 11 additional experts and advisors  Received additional input from the Tomorrow’s Company Good Governance Forum, the City Values Forum and the Tomorrow’s Value lecture series Introduction

The Good Governance Forum Introduction The ‘Board Mandate’ A mandate captures the ‘essence’ of the ‘character’ and distinctiveness of the company. It is about what the company stands for and how it wishes to be known to all its stakeholders. Boardroom conversations The importance of conversations in the boardroom as the ‘magic dust’ that underpins board effectiveness. The boardroom and risk The changing risk landscape and how boards can make themselves more risk resilient. The role of the chairman Guidance for chairman on leading a modern board.

The context  Libor manipulation (2012)  Mis-selling Payment Protection Insurance ( )  Mis-selling High Risk Investments (2011)  Mis-selling Rate Swaps (2012)

Why governing values matters Reputation risk Reputation risk is the risk of damage to Barclays brand arising from any association, action or inaction which is perceived by stakeholders to be inappropriate or unethical. Such damage reduces, directly or indirectly, the attractiveness of Barclays to stakeholders and may lead to negative publicity; loss of revenue; litigation; regulatory or legislative action; loss of existing and potential client business; reduced workforce morale; and difficulties in recruiting talent. Sustained reputational damage could have a materially negative impact on our licence to operate and destroy significant shareholder value. Barclays plc. Annual report 2012, p.188

Outline:  A model for governing values  The board agenda  Tool-kits  Next steps Introduction

A model for governing values board culture

A model for governing values board culture purpose

A model for governing values culture purpose

Board agenda 1.Set purpose, values and value propositions for each key relationship. 2.Agree corporate strategy to deliver purpose, values and value creation. 3.Ensure an aligned organisational capability including culture. 4.Agree decision making framework for decisions at all levels. 5.Make sure it happens: each level, hands off expectations on values as well as commercial targets and sets and reinforces through incentives and sanctions. 6.Board leadership including communication of all the above to all stakeholders.

1. Purpose, values and value propositions “…the real impact, and acid test, of a company’s culture is its impact on and alignment with the external stakeholders with whom it interacts and forms relationships. To work well and create the most value, these relationships need to be based on mutual values, trust and openness.”

2. Corporate strategy “We have said that our aim is to provide the best investment and retirement solutions in the market, in the most flexible manner, with unparalleled service to our customers at great value … strategically that means that we need to review our product set to ensure that it is fit for this purpose. The result is that in the last 12 months we have ended up closing somewhere in the region of 90% of our products. ”

3. Aligned organisational capability “ I don’t believe that you can teach people to want to help others. Our recruitment process is about finding people who want to give good service, and then teaching people the skills to deliver them… It is about the culture first and foremost, and then about the technical skills.”

4. Decision making framework “It always comes down to judgements and people. People need to rely on their own judgements and not rely on more processes to take you out of the firing line.”

5. Make sure it happens “We should not be naive. We have over 420,000 employees and not all of them will be behaving well. You need to have a system that detects them. When this happens it assures me that our system is working well.”

6. Leadership “Boards have to decide for themselves what is right. We do have debates, increasingly, that I have never seen in boards before, about the relationship of our business to the communities in which we operate in and aspects such as our responsibilities to the exchequer. That is a very positive development.”

Tool-kit 1: Agenda for boards Questions for boards to ask of themselves e.g. Purpose, values and value propositions Have there been major changes in our business, for our customers or other key relationships or social changes such that we need to revisit? Corporate strategy How well are we achieving our commercial goals consistent with our purpose, values and value propositions? Aligned organisational capability How well is our talent strategy meeting of organisational capability needs? Decision making framework How do our people who face the customers or suppliers everyday make decisions? Make sure it happens What are the KPIs we agreed to measure the culture and values telling us? Leadership Who leads on culture and values at the board? In the executive team?

Tool-kit 2: Mapping the journey Level 1Level 2Level 3 Purpose, values and value propositions indicators Corporate strategyindicators Aligned organisational capability indicators Decision making framework indicators Make sure it happensindicators Leadershipindicators

Tool-kit 2: Mapping the journey Level 1Level 2Level 3 CSR and environment programmes are the responsibility of the CEO and levels below Chairman and CEO explicitly support the CSR and environment programmes Board members are selected, in part for their high moral integrity. Comprehensive stakeholder analysis is under-weight One NED is responsible for values & culture and/ or a board sub- committee has organisation culture/ values/ reputation/ non-financial risks as part of its terms of reference, who make regular reports to the board on alignment, values and compliance Chairman & CEO are seen to lead the organization on values-driven ethical behaviour Board members role model the values and culture A confidential “Speak Up” process exists and summary reports produced for the board Chair & CEO live and breathe values, lead communication internally and externally. Talk about the importance of culture and values constantly with employees and stakeholders. Member of the executive management team accountable for developing a strategically aligned values driven culture and heads a virtual cross functional team Members of the board and the executive management team demonstrate their personal commitment to the values and visit company sites holding town halls etc. to test and report on culture and values. Boardroom culture open and self- critical. It is a safe space for concerns to be raised and discussed. The significance of culture and values are discussed at the board in relation to all strategic decisions Leadership

 Confidential dialogues with chairmen and other senior figures to refine the tool-kits  Launch in the Autumn Next steps

Q & A Governing values