Outlook: Taylor/Barclays

IF IT was not apparent to the Barclays board on Friday that Martin Taylor's shock resignation as chief executive would plunge the bank into crisis, it must be by now. The more that becomes known about Mr Taylor's progressive alienation from his fellow directors, the more shambolic and worrying the situation at Barclays appears.

Obviously the bank is not about to go under, and indeed, compared to the same stage of the last cycle, Barclays seems operationally to be in good shape. What the management crisis has exposed, however, is a corporate governance issue of scandalous proportions. By the end, the number of executives on the board involved in day-to-day management amounted to just three, including Mr Taylor. The rest of the board seems to be largely comprised of friends of Andrew Buxton, the chairman.

At least three of these, including Mr Buxton, are there on a virtually full-time "executive" basis, yet apart from drawing large salaries and occupying big offices, with corresponding secretarial back-up, it's hard to know what their purpose is.

One thing that directors in this position do is scheme, meddle and stop the chief executive doing what he wants to do. Mr Taylor found himself blocked at every turn. His board suspected him of leaking to the press to bulldoze his proposals through, he suspected them of leaking in order to undermine him.

With Sir Andrew Large's elevation into another "phantom" executive position last May, the situation became untenable. Sir Andrew behaved like a corporate commissar, double checking the chief executive's every move and arranging his own independent meetings with management and advisers.

Sir Andrew's manoeuvrings so alienated other senior executives that when the job as chief executive did become vacant, he was passed over in favour of a compromise candidate, Sir Peter Middleton. Sir Andrew may have succeeded in finally driving Mr Taylor out, but he put paid to his own chances in the process.

The board's apparent failure to deal with these waring factions is bad enough. A more serious charge is that the board stood between Mr Taylor and the pursuit of shareholder value. Mr Taylor believed strongly that Barclays Capital, the bank's investment banking arm, had become a drag on the company's stock valuation.

This in turn meant that the retail bank was prevented from pursuing an appropriate consolidating merger - with, say, Halifax - on advantageous terms. The way forward was therefore to sell or hive off Barclays Capital, possibly in conjunction with the rest of the bank's corporate business.

The rest of the board thought this approach too radical; several directors believed a bank of Barclays' stature must in any case have an investment banking arm. To some extent it became a vestiges of empire versus shareholder value argument. But it was also an us and him thing. Mr Taylor never entirely fitted. The City must make up its own mind on who was right, but certainly what remains of the board seems to lack any kind of coherent alternative strategy.

A corporate finance solution to the management and strategy vacuum would still seem like the best outcome. George Mathewson, chief executive of Royal Bank of Scotland, would for one gladly reverse his bank into Barclays if he could manage it out of Edinburgh. So would Halifax. But having blocked so much else, the board is undoubtedly too proud to consider anything of the sort. After all, there are those salaries to defend.