Family Vault

Troubled Barclays bowed to its big shareholders last week when Andrew Buxton, a scion of the bank's traditional elite, decided to drop one of the top two jobs. But the row has put the spotlight on the enduring influence of the 20 clans that have controlled Barclays since it was born of a union of small family banks in the late 19th century. Now, as the Eighties legacy of bad debts fuels pressure to reform the structure, Buxton is being seen by critics in the bank and the City as the last echo of the old squirearchy. John Willcock on the ascent of the spread eagle's brood.

IT IS ONE of the great mysteries of British history how so many of our historic institutions manage to perpetuate themselves long after their natural span. The Royal Family is an example; a less obvious one is the management of Barclays Bank.

Few people outside Barclays, and only a select few within it, fully understand how a squirearchy of regional families, with their banking roots stretching back to the late 17th century, have managed to dominate one of the UK's leading public companies throughout the 20th, and to maintain this dominance while controlling less than 1 per cent of the bank's share capital.

The matter has come to a head because Barclays has made Andrew Buxton, a scion of one of these banking families, chairman and chief executive at a time when the bank has suffered a spate of bad news over property loans, falling profits and suggestions that it may be forced to cut its dividend.

Mr Buxton's appointment seemed to many in the City an unwelcome throwback to the past, at a time when Barclays should be reforming itself. Through much of the 1980s, the bank had a separate chairman and managing director. But contrary to current management practice, Barclays proposed to reassert tradition by combining the two roles in Mr Buxton.

His shareholders rebelled. Last week he bowed to their pressure by confirming that the two roles would be split at an opportune time. A new chief executive is to be appointed, below Mr Buxton as chairman.

Sir John Quinton, who retired as chairman last month, was only the second non-family member to hold the top job in the bank's history. But reassertion of the family succession, with Mr Buxton, raised eyebrows in the City. He is also blamed for his part in Barclays's current troubles, including its expansion of property lending in the late Eighties. Criticism reached a crescendo just before Christmas, when Barclays was forced to make provisions of pounds 240m against Imry, a troubled property company, casting fresh doubt on the bank's pounds 8bn property and construction lending. To many, Mr Buxton is a symbol of the family system that was once one of Barclays' great strengths and is now one of its greatest weaknesses.

Unlike the other three big high street clearing banks, Barclays has preserved largely intact a decentralised, district-based structure dominated by the founding families since it was formed by the amalgamation of numerous local banks in the late 19th century. This culminated in the merger of 20 Quaker family banks in 1896.

Mr Buxton himself comes from a wealthy brewing family which has been connected to the Barclays clan system since the early 19th century, when Sir Thomas Buxton married into the East Anglian Gurney family.

B arclays takes its symbol, the spread eagle, from the Quaker banking and goldsmithing firm founded by John Freame in 1728. Eight years later, Freame's brother-in- law, James Barclay, became a partner in the Black Spread Eagle. This early business link by marriage symbolises perfectly the development of Barclays by merger and family solidarity over the next 2 1/2 centuries.

Two more Barclays relatives joined the Black Spread Eagle, Silvanus Bevan in 1767 and John Henton Tritton in 1782. The bank then assumed the name it was known by for more than a century - Barclays, Bevan & Tritton. This provided a solid base for the bank in the burgeoning commercial life of London.

A series of changes in banking law, culminating in 1879, meant that joint stock banks formed outside London could start buying up the smaller private banks, such as Barclays, Bevan & Tritton. So, after lengthy talks, the latter agreed with two of the other big Quaker-run firms, Jonathan Backhouse & Co and Gurneys, Birkbeck, Barclay & Buxton, and 17 smaller Quaker-run banks, to merge and form a large enough bank to resist all takeover attempts.

The new bank was called Barclays. It was overwhelmingly rural, apart from the London core. From the start, it had a strong tradition of serving the fishing and farming community, and retains the county flavour to this day.

Instead of relinquishing local control and becoming a centralised 'modern' institution like the other clearers, the families which formed Barclays - the Bevans and Trittons, Gurneys and Tukes - decided quite deliberately that they would continue running the bank as if it was 20 or so separate mini-banks, each with its own local board.

An insight into the development of Barclays can be gained from the History of Barclays Bank, published in 1926. The book was compiled by P W Matthews, formerly on the staff of the London partnership Barclay, Bevan, Tritton, Ransom, Bouverie, and edited by Anthony W Tuke, who progressed from local director of Luton district, one of the most important in the bank, to chairman of Barclays in 1951.

In the first chapter, the authors refer to 'the complete centralisation which has been adopted, with certain minor exceptions, by the other joint stock banks'.

The authors contrast favourably Barclays' continuity of service, based upon families continuing to control local bank districts, with the more centralised structures used by Midland, Lloyds, National Bank and Westminster Bank.

'There can be, however, no doubt that customers appreciate the avoidance of many of the delays which are inevitable under the alternative regime and that the staff appreciate the maintenance of some at least of the personal element in their relationship with 'the powers that be', which obtained in the old days of the private banks,' they write.

'Moreover the system is designed to preserve the great advantage which the partners in a private firm enjoyed over the local manager of the rival joint stock bank in the intimate knowledge which they possessed concerning the personal character and business capabilities of their customers, founded as that knowledge was in all probability on the experience of several generations.'

Here in a nutshell is Barclays' rationale for preserving its clan structure in preference to a more centralised, some might say more meritocratic, regime.

The first chairman was Francis Augustus Bevan, grandson of Silvanus Bevan. Over the ensuing decades, the families proved that they had an astonishingly enduring hold over the bank, even though they ceased to be the leading shareholders.

Comparing Barclays' original central board of directors of 1900 with that of 1970 is striking. In 1900 the chairman was a Bevan - one of two Bevans on the board - while the vice-chairman was a Buxton. There were also two Barclays and two Birkbecks, a Seebohm and a Tritton.

By 1970 there was still a Seebohm as deputy chairman, while there were no less than three Bevans on the board. In that year there were also two Tukes, a Barclay, a Gurney and a Birkbeck.

Ironically, this structure was supervised for the first 40 years by a non-family executive, Frederick Craufurd Goodenough. He was secretary until 1917, and then chairman after Francis Augustus Bevan's retirement, until his own departure in 1934. Mr Goodenough, hired from the Union Bank of London, was the only chairman - apart from his son Sir William Macnamara Goodenough - recruited outside the families until 1987.

He set about consolidating the 20 member banks into a cohesive whole. But he did it by remaining faithful to the regionalised character of the original banks, adopting a decentralised structure quite different from the other high street banks. Each member bank was independently operated under the control of its own board of directors. Senior partners of the constituent banks were given seats on the Barclays board. In this way, long- standing relationships between each member bank and its customers were maintained, and the new company took advantage of the knowledge and experience of its leaders.

The bank's unique structure survived widening share ownership and growing egalitarianism after the Second World War by recruiting fast-track managers from the ranks of family and friends at Winchester, Harrow and Oxbridge. To a man, the senior managers were upper-class.

So complete was the class distinction inside Barclays between gentlemen and players that at top management functions, the wives of the elite made it unmistakeably obvious to which faction they belonged.

The bank's unspoken justification for this feudal structure was that it worked. Very crudely, the bank had 30 main families to choose from, and if each one produced four sons (not an outlandish figure in those days) and these sons then went to Oxbridge, the bank ended up with 120 Oxbridge graduates to choose from for its top jobs in the districts.

Naturally, there were exceptions. Andrew Buxton himself did not come up through the traditional route of a family-dominated regional arm of Barclays. Instead he has risen rapidly through Barclays' central management in London. But, rightly or wrongly, Mr Buxton is seen by many in and outside the bank as a traditional Barclays family heir. They believe that although he is as able as other executives in the bank, the family structure might well have eased his way to the top.

Barclays did not, however, promote family members willy-nilly. Duds were ruthlessly dropped or sidelined. By the 20th century, sons of the families had a special position as entrants, rather than as automatic heirs, to Barclays. If they could prove their worth, they would be given fast-track promotion within the bank.

The Barclays general manager who held sway after the Second World War, Cuthbert Fitzherbert, held a 'special list' in his desk of eligible young men from the families.

The managers of the bank were therefore all drawn from the ranks of the gentry. This placed Barclays apart from the other clearing banks. For instance at Midland, the world's biggest bank between the wars, almost all the staff had left school by the age of 18, more commonly 15. Barclays were the bluebloods, Midland drew its management from 'ordinary' branch staff.

A story commonly told about Barclays and Midland in those days was that, while the local Barclays manager would be riding to hounds with the local county set, his counterpart at Midland would still be struggling to be accepted as a member of the local golf club.

The Barclays families would cultivate valuable local banking contacts from their country homes, while Midland managers would be far more reliant on branch-based business and a tighter rein from London head office.

This divide was illustrated in 1919, when the Midland's chairman, Sir Edward Holden, a stern Lancashire Nonconformist and epitome of the Victorian self-made man, stipulated in his will that his son should be disinherited if he 'ever became a gentleman'.

Such an attitude the Barclays hierarchy would probably have found highly amusing. But the decentralised Barclays strategy bore fruit. Before the First World War, Midland was Britain's No 1 bank. By the 1970s it had slipped to No 4. Barclays, on the other hand, went from strength to strength.

It started off after its main merger of 20 Quaker family banks in 1896 as the UK's sixth largest clearing bank. In the 1930s it overtook Lloyds and in the 1950s the Midland. By this time it was both the biggest and most successful of the clearers, showing that the family- based system was the most efficient for that period. The Barclays family structure succeeded because banking was at that time a cosy cartel, in which social contacts proved crucial.

But by the end of the 1960s people began to feel that you simply could not run a world class bank on nepotism, and this was realised by management. Competition from overseas banks and UK building societies devalued the social aspect of banking, as did the emergence of a relatively less class-ridden society.

In a more meritocratic age, and as Barclays' relative lead declined compared to the other banks, the family system began to be seen as a millstone rather than an advantage. The system was watered down in the 1970s, when the element of special promotion was abandoned in favour of treating family members like other graduate entrants.

Gradually, Barclays turned decisively away from the old family structure, but this was not a uniformly smooth process. Although the grip of the families was waning by 1981, it was still strong enough to secure the appointment of Sir Timothy Bevan, the last real family grandee, as chairman. This meant passing over other, non-family candidates such as Deryk Vander Weyer, who had risen through the ranks to become deputy chairman and whom many in the bank regarded as ideally qualified for the top job.

The appointment of Sir Timothy, a leading light of the Royal Yacht Squadron and the Royal Ocean Racing Club, gave powerful signals in and outside the bank that the process of reform was stalled and family preferment still ruled. It is felt by many in the City that during the early 1980s Barclays missed a valuable opportunity to press ahead with reform, and let other banks steal the lead.

In 1986 Barclays finally swept the already weakened fiefdoms away, when it abolished the position of local director. The real break with the family ethos came when Sir John Quinton, the Cambridge graduate, non-family career banker and football fan, succeeded Sir Timothy as chairman in 1987.

Ironically, it was the very urge to catch up from these 'wasted years' that may have contributed to Barclays' present problems. Sir John, as chairman, and Andrew Buxton, as chief executive, launched a pounds 922m rights issue in a bid to be 'No 1 by '91'.

The bank rapidly expanded its lending to property and construction companies at the peak of the late-Eighties boom, with results that are all too vivid today.

Sir John also pressed ahead with reform, slimming down the management structure and reducing the family presence on the board; the change between 1970 and 1993 (in the table) is dramatic. Only one other family member, Humphrey Norrington, sits on the board with Mr Buxton and Sir Timothy.

The announcement last April that Mr Buxton would succeed Sir John as chairman and still retain the chief executive job caused a stir in the City. Last week the question appeared to be resolved, when Mr Buxton wrote to senior bank executives confirming what the bank had been intimating since last December - that when the time was right, a new chief executive would be appointed under Mr Buxton, who would remain chairman.

Yet the City remains ambivalent about him, and this is why his family background comes under the spotlight. The interesting thing is that he is neither one thing nor the other; neither a family banker who worked his way up through the districts, nor a solid meritocrat who has risen unquestionably through his abilities.

Instead, Mr Buxton is a hybrid of the old and the new: an echo of the feudal system which served Barclays so well while British banking remained class-ridden and insulated from competition. The question would not matter so much if he was the final echo. But there are plenty of family members still dotted about Barclays offices, in the City and the regions. Will any of them make it on to the reformed board? Formerly, family members would gain preferment because there were other family members making sure the system worked further up the ladder. But will Mr Buxton be willing - or able - to give the next generation of family hopefuls that vital leg-up?

This is extremely unlikely. Just as the shareholding institutions extracted Mr Buxton's embarrassing climb-down last week over combining the two top jobs, so they are hardly likely to allow him to install a new series of directors simply because their ancestors founded the family banks back in the 18th and 19th centuries.

To be fair, Mr Buxton is also extremely unlikely to want to do so. His career has been with the central management function, and he is as keen as anyone to promote the talent which will help to haul Barclays out of its present troubles.

They will still have their chance to prove themselves in the new management structure. But if they do not measure up, the Tukes and Gurneys, Bolithos and Trittons will fade into banking history like so much else of Britain's economic past.

(Photographs and chart omitted)