The MT Interview: Barclays' Marcus Agius

Barclays' chairman on its 'constructive dynamic', the Lehman deal, and that Varley/Diamond combo...

by Chris Blackhurst
Last Updated: 31 Aug 2010

When I step out of the lift on the 31st floor of Barclays' Canary Wharf headquarters, Marcus Agius is waiting to greet me. I'm not being taken to meet him or left to sit somewhere until Agius, head of one of the biggest banks in the world, is ready; instead, it's informal and personal - and thoughtful. His attire is elegant and individual. He has eschewed the uniform of the senior banker - pinstripe suit, braces and polished Oxfords - in favour of a designer suit and loafers. Yet he conveys authority and confidence.

There's something he wants to show me, he says, leading me by the arm. To the right of his office door is a corridor lined with paintings of his predecessors. To a man - and they are all men - they look forbidding and serious. These are not people to be messed with, and neither do they seem the sort to mess up. Anyone searching for a twinkle in the eye or a roguish grin will be disappointed.

It's Agius who chose to have them put there. He's the chairman of Barclays, and how that part of the bank's head office is decorated is presumably up to him. Some in his position, in a bank that has moved to a gleaming tower block, might have ditched the portraits as irrelevant to a 21st-century financial powerhouse. But Agius is proud of them. It feels as though his antecedents are keeping watch over him and the bank, checking that he and his colleagues don't drift from historic values.

The gallery is a deliberate reminder of how things were and how they must continue to be. He may be chairman with all the power that the title confers, but his pre-eminence is temporary: he is nothing more than the current holder of a baton that has been passed over centuries.

In his office, the emphasis is on modernity. The room is light and airy, with a view across the East End to the site of the 2012 Olympic Games. There are pieces of modern art on display but they're not ornaments - a wavy, glass-topped table gets good use as his coffee table. There are no screaming photos of the chairman alongside world leaders and celebrities. Everything is quiet and understated - Agius, this space is saying, is not a bank chairman turned pop star.

But in the world of high finance, the achievement of Barclays on his watch has been nothing short of remarkable. While other banks have wilted and in some cases gone under, Barclays has scored three stunning coups. No sooner did Lehman fold than Barclays emerged as the buyer of its US business for what is now perceived as the bargain price of $1.75bn. Second, it stayed clear of the Government's bank bailout by persuading Arab investors - including Gulf royals and sovereign wealth funds - to pump in extra capital. Then, Barclays effectively hived off its toxic debts to a group of employees who believed they could clean it up and make their fortunes.

Each move was clever and provoked admiration in the City. Of course, the actual deal-making was not down to Agius, but he was in overall charge. He has also had to preside over what is seen outside Barclays as a potentially combustible rivalry - that between John Varley, the CEO, and Bob Diamond, head of Barclays Capital, the bank's massively successful investment banking arm. The fact that he has managed the whole lot so smoothly must be testament to his diplomacy.

Agius, now 63, became chairman of Barclays in January 2007, having joined the board in September 2006. For the previous 33 years, he had been with one employer: Lazards, the New York-based advisory bank. He remained with its City arm and, by the time he left, was its London chairman.

Lazards specialises in offering discreet corporate advice. It isn't known as a trading house that plays the world derivatives and futures markets. Its reputation is built entirely on helping its clients raise capital and launch and defend takeovers. Agius's proud boast is that before Barclays, he lived in the same house, was married to the same wife (Katherine's father was the late Edmund de Rothschild of the banking dynasty) and had the same employer - from 1972.

What's intriguing about him is that he rose to the top of an extremely smart City bank and wed a de Rothschild, yet he's not blue-blooded himself. He went to St George's College, Weybridge. At university (Cambridge), he studied engineering on an industrial scholarship. 'I was funded through university by Vickers Armstrong, the old armaments firm. In truth, my heart wasn't really in it. I graduated in 1968 and while I was with Vickers, my friends were heading for the City, which was enjoying a boom.'

He resolved to join them. But first, as an engineer, he had some catching up to do. He went to Harvard Business School to study for an MBA. 'I'd not worked hard at Cambridge, but I worked hard at Harvard,' he laughs. 'I did well. You could say I went from mechanical engineering to financial engineering - but, of course, that would be too cute.'

He entered the City with Lazards and progressed there. 'I was chairman of the London end and deputy chairman of the whole group. Towards the end of 1995, I was asked if I'd take a non-executive directorship of BAA. Then, after certain conversations, I became chairman.'

BAA was facing a takeover from Ferrovial of Spain. 'It was very hostile. Mike Clasper, the CEO of BAA, was very clever and a passionate man. We were appalled by the Spanish bid and resolved we would make them pay up - and we did. All the shareholders emerged very happy.'

Ferrovial initially offered 810p a share. Eventually, Agius accepted 950p, or £10.3bn. As chairman, he says, at times like that 'all hands are to the pump'. As soon as the bid came, 'the bankers called a team together. Everyone worked incredibly hard.'

A takeover, he says, is 'a process of sustained crisis for everyone - for management, staff, investors. And it can be extremely adversarial.' In those circumstances, says Agius, 'the chairman has to be very calm, clear-thinking and able to think ahead'.

At least in his 'day-to-day job at Lazards', as he puts it, he'd been used to M&A, 'so it wasn't so much of a shock for me as it was for some of the BAA executives'. The struggle went all the way to the 60th day, the limit set by Takeover Panel rules. 'We decided to push Ferrovial to raise their offer to a level we couldn't refuse. Our job was to string them out as long as possible.'

Agius's priority, he recalls, was to communicate as much as possible to the shareholders, 'but to make sure that when I talked to them, the message was as clear as possible. Being chairman required a combination of communicating and being an adversary.'

At one stage, the investment bank Goldman Sachs asked to see him. 'They said: "Can we come and talk to you about not wanting Ferrovial to take you over?" I said: "Fine." Then they said: "We've got a good idea: why don't we take you over?"' They were quickly shown the door.

Agius grins. 'You could say that was not very compelling.' When the deal went through, he didn't think it right to quit as chairman immediately. 'I felt a responsibility to the staff, so I didn't walk out on day one. I stayed on for six months, until it had settled down.'

Then came an offer to chair Barclays - which he jumped at. 'It was an extraordinarily interesting proposition,' he says, with characteristic understatement, about being invited to steer one of Britain's and the world's largest banks. Conceptually, says Agius, chairing Lazards London and BAA was not different from Barclays, 'but there were different pressures and realities'. At BAA, for instance, the board was looking at projects that would take decades to reach fruition. At Barclays, it was much more immediate, in an intensely competitive industry.

'The essence of being chairman is to see across all the company but always as chair of the board to protect the interests of the shareholders. You must take the business forward. What does that mean? No business stands still. The job of chairman is to help it grow - and for that you need a clear strategy and you need good management.'

It's crucial, he says, that the chairman 'recognises that it's the management that delivers value'. The chairman is not running the company day to day. 'What the board should do is be in the background, as the management work to a pre-agreed strategy. They should challenge the executive: are they delivering what we want?' But, he adds, 'it's very important the way that challenge is made. Because, if it's not a constructive challenge, the executive might not respond positively and might even come to resist it.

'The job of the board is to champion the executive. You must not have a situation where the executive goes off on a frolic of their own,' he says. But neither should the oversight be so close that the executive 'feel they must constantly look over their shoulder, or they will stumble'.

He's paid £750,000 a year for a job that, although carrying huge responsibility, is meant to be three days a week. But, he says, 'I'm in contact with John Varley (the CEO) most days - we e-mail, we speak on the phone or we meet face to face. I'm supposed to devote three days a week to Barclays, but during the banking crisis it was seven days, the stakes were so high.' Varley's office is on the same floor and the one wanders round to the other - there are no formalities.

The board usually meets eight times a year, but over that crisis period it met 31 times - six times on the weekend Lehman collapsed, in September 2008. There is a distinction that is very important, he says: 'A non-executive chairman is not the same as a part-time chairman.'

Agius is a great believer in not 'pre-cooking' a meeting. He doesn't prepare them in advance, with Varley or anyone, and agree a line of discussion. 'Our non-executives are high-calibre and they have so much at stake personally. To have them on the board to not ask anything would be a mistake, it would be perverse.' His job, he says, 'is to tease out the real concerns of the board.'

He is constantly striving to achieve a 'constructive dynamic' between the board members. If someone has an issue that isn't raised, either because he didn't spot that they wanted to raise it or they felt they couldn't, he feels he has failed.He wants to be sure that everyone is in the picture. 'My strategy is to over-communicate rather than under-communicate.'

He describes the origins of the coup of landing Lehman's US operations. 'The first question of our buying Lehman was put to us by the US Treasury in June last year.' It was approaching others as well. At Barclays, 'the knee-jerk reaction was to say "of course not", but because the call came so early in the process, it gave us the opportunity to say: "Hang on, the US is the biggest corporate market in the world. If an opportunity to buy a bulge-bracket firm comes along, that's something we should think about."'

There was, he says, much to-ing and fro-ing. 'John Varley and I discussed it. In late June, I decided to dedicate a board meeting to it: we discussed only Lehman. The executives worked from publicly available information and prepared a paper for us. We were able to stand back and take a forensic look. It was an unpressured opportunity for all the non-executives to ask awkward questions, which they did.'

After 'proper analysis and debate about making a possible acquisition, we concluded it was of interest but the price would have to be very low'. Following that, says Agius, there wasn't much further thought on the matter until the Thursday night before Lehman's collapse on the Sunday in September, when the US Treasury called again. Because they'd had that special meeting, the board was able to move fast.

'We were clear about what we would do; we were clear about the price we'd pay,' recalls Agius. But Barclays didn't buy all of Lehman, 'because the size of the deal would have required a shareholder vote'. Without a guarantee from the UK Government, it was impossible to reassure investors exactly what the bank was letting itself in for. The UK Treasury was not prepared to commit taxpayers' money, so the purchase of the entire bank never went ahead.

Actually, Barclays wanted only the US end anyway, and after Lehman went down, it made its move. 'Because there'd been the opportunity of taking a cold, calm look at Lehman some weeks before without the pressure of a deadline, we went into that weekend a lot stronger.'

Then, when the banking crisis widened and it looked as though British banks would require state aid, 'our predisposition at Barclays was that we'd prefer not to take government money. It seemed to us more than likely that the Government would put in taxpayers' funds and so we'd be required to follow the taxpayers' domestic agenda. But more than half our business was outside the UK: we wanted to be able to prosecute our interests as we saw fit.'

By persuading Middle Eastern investors to inject capital, the bank was able to remain outside the UK bailout. But it has been caught up in the bonuses controversy. Agius is sanguine. 'My job and the job of the board is to pay the staff as little as we can get away with - and attract the best staff. Paying as much as possible is not an objective in itself.'

He has no problem with the payment of bonuses as such. 'In our business, a few individuals can make a huge difference. You do need to pay them an incentive to motivate them and get the very best out of them.' Bonuses won't disappear. 'You're going to see an evolution, so there's more deferment and they're paid with stock, and (payments) must be in response to a delivered outcome.' But there's still going to be competition for the best people, he says.

Outside Barclays, he sits on the BBC board as the senior independent director overseeing the remuneration of the broadcaster's most senior executives - an issue that has been dogged by controversy. 'Defining performance at the BBC is more difficult. At the BBC, as well, the question is: what is socially permissible? It's not a question that applies in that way to the banks.'

He's a trustee of the Royal Botanic Gardens at Kew, a position he adores. His country home is Exbury, the de Rothschild estate in Hampshire, with its magnificent gardens. He's passionate about gardening. 'It can be very expensive, but it's a lot cheaper than owning a big boat or racehorses. Aesthetically and therapeutically, I can't think of anything better to be doing. I'm very hands-on, I love every aspect of it.'

On Barclays, he maintains that far too much is made of the Varley-versus-Diamond rivalry. It's true, they are chalk and cheese - Varley is a quiet and reserved Brit, Diamond a gregarious American. And they both went for the job of CEO, and Varley won. But to the surprise of many outsiders and insiders, Diamond has stayed and prospered, developing BarCap into a formidable global investment banking force.

Has Agius ever had to come between them? He shakes his head. Contrary to what is widely supposed, he says, 'there's never been anything to sort out. They're two very different, very able individuals. They both work together very well - they work like partners. They've found a modus vivendi, which enables them both to realise their best potential.'

The bank's securing of Middle Eastern investors was a team effort. 'We resolved to raise enough capital as fast as possible and we also realised there would be no appetite for the fund-raising in London.' Barclays had turned to Qatar as an investor previously, and the Qataris were approached again. They needed little persuading, according to Agius. 'They had a large shareholding and they'd been watching events very closely. They saw the refinancing as an opportunity for them - as it was for us. We were already in liaison with their people, who introduced us to others in Abu Dhabi. The board was very clear that time was of the essence.'

He pays tribute to the board repeatedly and it's clear he believes it is an element that sets Barclays apart and has enabled the bank to pull through the financial crisis. That Barclays has emerged successfully from the past 12 months is down to its people, says Agius. 'The board collectively has been nothing short of magnificent. It can't have been fun to be an executive or non-executive of any major bank in the last year. If we've done well, that's because of the application and dedication of all of the board. It would have been so easy for the board to get ragged at some point, and it never did.'

Much of that, he says, was due to something unique and intangible within the organisation. 'Barclays has a strong culture. It has been there since the very beginning of the bank. You know what they say about a place's culture: it's the thing you can't see from the outside. Or, as has been said before, it's the way people behave when no-one is looking.

'If the culture is strong, you don't have to breathe down people's necks all the time - the right thing happens automatically. As Barclays has grown in numbers, each intake is indoctrinated into its culture.' He smiles. 'So that makes it a very satisfying place in which to work.'

On the way out, we linger over the view from his office window. In the distance, the Olympic Park is being built and the new stadium is well advanced. Agius is excited by 2012: he believes it could help transform the blighted East End. He points down. 'You see that school? I go and help out there,' he says. 'We also get the children in here and show them round, and try and educate them and enthuse them about what we do.'

It's a school, he says, where for many pupils English is not their first language. He describes the head teacher as an inspiration. It's a serious, poignant moment. Agius may be chairman of a bank, but his social instincts are strong.

There's not much likelihood of him allowing Barclays to forget its past or where it has come from, or the contribution it can and must continue to make. The portraits along the corridor would doubtless approve.


1. To keep Barclays away from any restrictions placed on banking by the Government

2. To ensure a smooth succession for both himself and the CEO

3. To continue to oversee Barclays' growth without compromising the bank's capital base

4. At the BBC, to devise a payment structure that attracts and retains talent without arousing controversy


1946: Born 22 July. Educated at St George's College, Weybridge. Reads engineering at Trinity Hall, Cambridge; works in industry with Vickers, then completes an MBA at Harvard

1972: Joins City of London arm of New York merchant bank Lazard Brothers

2001: Deputy chairman of Lazards group and chairman of Lazards in London

2002: Chairman BAA; negotiates takeover by Ferrovial of Spain

2004: Chairman, Foundation and Friends of Royal Botanic Gardens, Kew

2006: Senior independent director, BBC, in charge of executive salaries

2007: Chairman, Barclays Bank.

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