Barclays' bonuses were the right response - to a self-inflicted crisis

Defending the business’s interests is the duty of those entrusted with running companies and therefore Mr Jenkins and Sir David Walker, the bank’s chairman, were entirely right to sanction the payouts.

However, while their response to the crisis was justified, it should be remembered that this was a crisis of the bank’s own making.

On assuming the top jobs in 2012 in the wake of the Libor-rigging scandal, Mr Jenkins and Sir David were charged with bringing the investment bank to heel. Neither man let any public meeting pass without reminding their audience quite how radical their plans for the bank were. Mr Jenkins’ “Transform” programme was to be about nothing less than changing the bank’s entire culture: out were the old days of big bonus-paying Bob Diamond, Mr Jenkins’s predecessor; in was the new-look austerity Barclays.

Of course, if you keep telling your staff you intend to pay them less, after a while they are going to listen and in North America, where the bank had, with its Lehman’s acquisition, snapped up for a song one of Wall Street’s premier fixed-income businesses, the message was particularly badly received.

As any senior manager of a large investment banking business will tell you, no subject is closer to a banker’s heart than their “number”, or in everyday parlance, their bonus. By talking down the Barclays “number”, Mr Jenkins sowed the seeds of doubt. When US markets last year enjoyed a strong rebound it created the perfect storm, triggering a move by leading rivals to go hunting for staff.

The lessons of this episode, which culminated in undignified scenes at Thursday’s public meeting, should be that senior staff who know they can command more generous rewards elsewhere will be prepared to follow the market.

In less than two years, Barclays has been through three strategy reviews of its investment bank and will next month unveil its fourth. The dangers of this approach are twofold. First, that clients may become wary of doing business with a bank that might pull out of a given service at any time — for example, Barclays’ decision earlier this week to exit large parts of the commodity market. Secondly, that staff might demand higher pay based on the increased threat to their jobs.

Next month’s strategy announcement needs to feel like the last word on the matter; Mr Jenkins knows he cannot easily return to next year’s annual meeting with a message of falling earnings and rising pay.

Pharma players must not sacrifice innovation

The highly competitive nature of the pharmaceutical sector has meant it has always been a hotbed for deal making, even in the doldrums of the recession.

Since the financial crisis, the majority of pharma players have been trying to focus their portfolios to give themselves a competitive advantage - whether this means selling or spinning off assets to streamline their business, bolstering resources in the biggest money-driving divisions of their company.

GlaxoSmithKline’s asset swap with Novartis, brokered by its canny chief executive Sir Andrew Witty, is the most radical and ingenious example of this to date. The deal means that neither side pays hand over fist for what they want, while they both avoid the inevitable cash haemorrhage that is usually associated with large-scale M&A.

But these structures are hugely complicated. That deal took months to pull off.

US group Pfizer would seem to prefer the model of old of throwing wads of cash at a problem and then slashing and burning costs to achieve growth. If it does succeed in acquiring AstraZeneca, the US giant will be able to achieve two to three years of good growth from savage cost-cutting, according to City sources.

This may prove popular with short-termist shareholders who have popped enough pills to forget the hangover from Pfizer’s £50bn acquisition of Wyeth. But it will not be popular with those who would like to see growth in the form of new drug discoveries.

Admittedly, AstraZeneca has been the pharma equivalent of a huge oil tanker struggling to change direction for the past five years. However, it has been taking baby steps in bringing bolt-on deals at reasonable prices. And it has ramped up ambitions to propel its drug discovery efforts by relocating its research and development division to Cambridge.

If a takeover deal went ahead it is likely that UK-based drug innovation would be the first to go. M&A tends to have a debilitating affect on drug discovery and R&D, particularly in protracted deal discussions where projects are slowed while the future is discussed. Pfizer also has a track record of delivering promised synergies by shrinking R&D spending.

For an industry that is supposedly driven by innovation, an acquisition driven by cost-cutting and the likely job redundancies at the expense of innovation would be a crying shame.

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