Outlook: Over here, overpaid and finishing off

PRESS GANGED late last year into a stand in role as chief executive of Barclays, Sir Peter Middleton was like a dog with two tails yesterday as be paraded his new catch before the national press. On the face of it, Michael O'Neill is everything Sir Peter could have hoped for.

He's an outsider, he's an American, and he doesn't even need a work permit - his mother is Belgian, entitling him to work in the European Union without having to demonstrate that no other European is up to the job.

But perhaps most important of all after the board's experience with the cad Martin Taylor, he's a banker by training and choice. There's always some fly in the ointment, however, and in Mr O'Neill's case it is the American-style remuneration package that comes with the contract.

By US standards, this is by no means excessive, and even judged against his UK peers he will be only fifth in line on base salary after Greg Hutchings, Gerry Robinson, Sir Richard Sykes and Sir Clive Thompson. But base salary is just where it starts. Once the guaranteed bonus, ex-pat allowance and pension contribution is taken into account, his first-year salary rises to pounds 2.3m.

On top of that, he gets pounds 5m worth of free shares over three years by "risking" an equal quantity of his own money in the stock. To be out of money on this element of the package, then, Barclays shares would have to nearly halve over the next three years. Even if you think western stock markets are a financial bubble waiting to burst, a sustained fall of that order seems somewhat improbable.

Much more likely is that the former US marine will end up doing a Victor Rice with one of his old buddies from the US banking industry, engineer a trans-Atlantic merger, and the whole Barclays "problem" will vanish into a global mega bank. Mr O'Neill was already talking mergers yesterday as a route to shareholder value, and he should know. He played a key role in two such exercises - BankAmerica's merger last year with Nationsbank and before that its merger with Continental Group.

But perhaps this is too cynical a view. Mr O'Neill's appointment certainly seemed to go down well in the City, which has no difficulty with pounds 4m a year salary packages, and in a good market, the shares edged up nicely yesterday. Unlike his predecessor, Mr O'Neill is at one with the rest of the Barclays board in believing that a bank should be a combination of wholesale and retail.

Indeed, Mr O'Neill's expertise is in wholesale banking and financial markets, and not so much in retail, so presumably Barclays Capital can now breath a sigh of relief. It has a future, and probably quite a good one, under Mr O'Neill.

However, Mr O'Neill's tenure shapes up, one thing is certain. This appointment, much more so than Martin Taylor's, marks a final break with the traditions of the past. A number of descendants from the original banking families still stalk the corridors, both at head office and in the regions, but with the departure of Andrew Buxton as chairman later this year, they will no longer be represented on the board. Mr O'Neill brings a wind of change that Mr Taylor, for all his efforts, failed to generate at the pitch necessary to blow away all the old cobwebs. One way or another, he'll be finishing off the job that Mr Taylor began.

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