In the era of fast bosses, Wall Street embraces the ‘CEO forever’
In 2013, then in his fourth year at the helm of Bank of America, Brian Moynihan became the first CEO to decline Yale University’s “Legend in Leadership” award, claiming it was too early in his tenure. .
“He thought he didn’t deserve it yet, he thought it was a work in progress,” said Yale School of Management professor Jeffrey Sonnenfeld, who presented Moynihan with the award, which he ultimately won. accepted in 2018.
Moynihan, 61, apparently sees a lot of work still to be done at BofA. This month, he indicated he intends to stay until 2030, joining JPMorgan Chase chief Jamie Dimon in running for a tenure as CEO of at least two decades. Morgan Stanley chief executive James Gorman also said he wanted to stay at the company he had led since 2010 for at least three years.
Over the past decade, CEOs of major US banks have rarely resigned unless they are forced to. A fraudulent sales scandal toppled two Wells Fargo CEOs, while Michael Corbat retired prematurely after the bank botched a Revlon loan payment, resulting in millions of dollars in regulatory fines, legal fees and operating losses.
Only Goldman Sachs’ Lloyd Blankfein decided to leave of his own free will when he handed the reins to David Solomon in 2018 after 12 years at the top of the table. Choosing the right time to leave can be a challenge, he told the Financial Times.
“When things are going well you don’t want to leave, but when things are going bad you feel like you can’t leave,” Blankfein said. “You have to have discipline to leave when you don’t want to leave. “
Unlike Dimon, a financial services veteran who worked at American Express and helped create Citigroup alongside Sandy Weill, Moynihan, a lawyer from Rhode Island, is a less obvious pillar of Wall Street. He has beaten his internal and external rivals to replace Ken Lewis at BofA, and has already held the management position longer than many observers anticipated.
“Brian was not the expected winner and he always surprised on the upside,” said Sonnenfeld.
Dimon, Moynihan and Gorman oppose the general trend of American business. According to data compiled by research firm The Conference Board, the average tenure of outgoing CEOs in financial firms in the Russell 3000 Index has halved from just under 15 years in 2017 to seven years in 2020.
A long tenure has its obvious advantages: CEOs of banks who have been in office for more than a decade accumulate the knowledge necessary to manage sprawling institutions that are often considered too large to manage.
But it can also serve as a roadblock in the push for greater diversity in the ranks of CEOs, an area where Wall Street has lagged behind other American companies. Jane Fraser didn’t become the first woman to head a major US bank until earlier this year.
Banks have tried to compensate for the lack of diversity at the top by promoting more women at the lower levels of senior management, as evidenced by the reshuffles of BofA and JPMorgan this year that have given more responsibilities to female executives.
“The way to tolerate the demand for diversity is to do what Bank of America and JPMorgan did, which is to say. . . promote women to leadership positions, ”said Matteo Tonello, CEO of the Conference Board.
Another downside to long tenures is that ambitious executives may tire of slow succession races and decide to leave the company to take the top job elsewhere, or risk falling out with the existing CEO when their desire is to quit. ‘spoofing the holder becomes too obvious.
Weill said the reason Dimon left Citigroup under acrimonious circumstances was because he was eager to be elevated to number one. “The problem was that in 1999 he wanted to be CEO and I didn’t want to retire,” Weill told the New York Times in 2001. “I’m sorry I got to this. I don’t know what else could have been done other than being more patient.
Impatience also appears to have spread through JPMorgan’s executive ranks, where a series of potential Dimon successors have left the bank and now lead other lenders. Jes Staley, now at Barclays, has already been nominated as a candidate, as have Standard Chartered’s Bill Winters and Matt Zames who moved into the private equity industry.
Moynihan’s intention to stay at BofA until 2030 was announced shortly after the departure of Tom Montag, its COO who had previously been hinted at as a potential future CEO. But Montag, now 64, would have been 70 if he had waited for the job to open, effectively disqualifying him.
BofA said this month that it was preparing a broad roster of potential Moynihan successors as part of a reshuffle announced through a seven page press release, prompting analysts to say this was the longest list of leadership changes they’ve seen in their careers.
“It sounds like a decade of baking, which would be an unofficial record,” said John Coffee, a corporate governance expert at Columbia University.
Corporate governance experts point to the complexity of managing a lender such as BofA or JPMorgan as one of the reasons why the tenures of CEOs of large banks are twice as long as the average length of a director general of the S&P 500. The latest financial crisis sparked a wave of mergers that created universal banks with a wide range of industries, from wealth management and retail mortgages to investment banking and Trade.
“Running a bank today is quite different from running a bank in 2007,” said Marc Goldstein, head of US research at corporate governance group ISS.
In addition to requiring broad operational expertise, senior banking positions have become increasingly political over the past decade.
CEOs of banks are regularly brought before Congress to testify and are expected to spend a good deal of their time working on complex and ever-changing financial regulations. They are also frequently called upon by the media to comment on the global economy.
“Part of a bank CEO’s job in a crisis is to instill confidence to keep the market from panicking, so there may be benefits to having someone who’s been through a couple. [of] crises and who can project that air of calm, ”Goldstein said.