Barclays refuses to pay headhunter's search fee

BARCLAYS BANK, the high-street clearer that was rocked earlier this week when its new chief executive, Mike O'Neill, quit because of heart problems, is refusing to pay all of the pounds 500,000 search fee that was agreed with headhunters Spencer Stuart until a replacement for Mr O'Neill is found.

Barclays insists it is normal practice to make a small down payment when a headhunter is engaged but for full settlement of the fee to be delayed until the candidate has completed a trial period, usually of several months. "We are not paying for a second search," Barclays said yesterday, "although obviously there will be further expenses such as plane tickets."

Mr O'Neill was given a clean bill of health in February when he was checked out on Spencer Stuart's behalf by one of their Harley Street doctors before the final offer was made.

However, after a bout of flu last month Mr O'Neill consulted his own doctor in California and was diagnosed as suffering from heart arrythmia, a serious but not life-threatening condition, and was strongly advised against taking up the post. The diagnosis was confirmed at a second medical by Spencer Stuart's doctor in London on Monday.

The fee for executive searches is generally pitched at 30 per cent of total annual package, including allowances and options. Mr O'Neill's package including allowances was worth up to pounds 15m over three years,

Barclays is adamant that the checks were correctly carried out and that there is no reason to drop Spencer Stuart and appoint another headhunting firm.

Barclays' board met yesterday for the second time this week and agreed to press ahead with the search. It believes that having done the initial winnowing it is at a relatively advanced stage. There is one candidate who was a strong contender before Mr O'Neill was appointed who the bank is trying to contact.

Insiders were adamant, however, that Barclays did not want it to look as if any decision would be rushed.

There were suggestions yesterday that Barclays may appoint an internal candidate. John Varley, head of retail, and Chris Lendrum, head of corporate banking, are highly regarded. But City institutions believe the bank should try to find another international banker.