Abigail Hofman: Spat with sisterhood
I am involved in a spat with the sisterhood.
In May, my sister and I wrote an opinion editorial for the Financial Times posing the question: why are senior women so rare in finance? We took as the starting point the recently published UK parliamentary treasury committee report: "Women in the City". This report stated that the statistics looked bleak. There were only four female chief executives of FTSE 100 companies and women constituted 9% of the board members of FTSE 100 banks and 2% of bank executive directors.
I thought our article was balanced. We tried not to blame bank management for the dearth of top females in the industry. Instead we argued that the problem is complex and partly arises from the choices women make. This gender gap is a supply as well as a demand problem. We quoted senior banker Nichola Pease’s evidence to the committee: "I think the pyramid structure means that as you go up an organization, because of women’s choices, there are fewer senior women to chose from." We concluded that reaching the top in finance was a long, hard slog and potential solutions such as compulsory quotas that hint at entitlement are not the answer.
The article generated a lot of debate on the FT’s letters page. The most insightful letter came from Chandana Ganguly, a postgraduate student at the University of Oxford, who wrote: "The perception of women in banking is a self-fulfilling prophecy. A dearth of women in the past has created few success stories, casting doubt as to whether we would be able to achieve what has rarely been done before. As a result, many of us quit before the race begins. Although there may not be a conspiracy to keep us out of the ‘old boys’ club’, there may be a scarcity of mentors to encourage us."
I was particularly intrigued by a bellicose epistle from a group of female "finance grandees" including Noreen Doyle, a Credit Suisse non-executive board member; Judith Mayhew Jonas, a former Merrill Lynch non-executive board member; and Helena Morrissey, chief executive of Newton Investment Management, part of Bank of New York Mellon’s asset management platform. The letter, which accused us of stumbling into gender stereotypes, ended with a call to arms: "Let us not trivialize the debate with tabloid clichés about City women stamping their expensive heels. Instead, let us ensure that men and women who are in a position to take action do so, and swiftly."
The word "swiftly" is not a relative term. It means fast. I am therefore surprised that given that Doyle has been on Credit Suisse’s board of directors for six years, the gender composition of that board has remained constant. In other words, Doyle has been the only woman on the board of directors since 2004. In that period, the executive board has added one woman to its serried ranks of white men in suits. Today the composition of that 14-person board is 93% male, 7% female. I doubt that ratio mirrors the gender composition of Credit Suisse’s client base.
Of course, this imbalance, while regrettable, is not solely Doyle’s fault, other board members are also culpable. Nevertheless, I would not say that while Doyle (whom a mole describes as "formidable") has been in a position of influence at Credit Suisse, progress on this issue has been "swift". An impeccable internal source muses: "It’s not fair to blame Noreen: she has constantly pushed the diversity issue internally."
Is Dame Judith Mayhew Jonas in a position "to take action swiftly" to increase the number of senior women in finance? She does not seem to be currently involved in the world of finance either as an executive or a non-executive director. She is, however, a trustee of the Imperial War Museum: another body that has a stunning gender imbalance (19 men and one woman). Mayhew Jonas obviously knows about finance: she was a non-executive director of Merrill Lynch during some dark days for the firm (2006-08). I am not sure what to make of the fact that Dame Judith’s profile on the Imperial War Museum’s website doesn’t even refer to her period as a non-executive director of Merrill Lynch although many other accomplishments are listed.
To single out Credit Suisse or Merrill Lynch is invidious. The lack of senior female financiers is an industry-wide rather than firm-specific phenomenon. I looked at the gender composition of the main boards of Goldman Sachs (one woman, 10 men), HSBC (three women, 15 men), JPMorgan (two women, nine men) and UBS (two women, nine men) and could only roll my eyes in horror at the data. We can all agree that women are grossly under-represented at senior levels in the financial industry. It is more difficult to identify the causes of this under-representation. One banker put it bluntly: "Abigail, this is a world created for men by men. It’s like the military. A lot of male bankers will pay lip service to diversity but stall when it comes to real change. They say: ‘I’m all for more women but in my department, we simply can’t accommodate part-time or flexible working hours.’"
The solution to the problem is unlikely to be swift. In fact, I fear it will be a tortuously protracted process. The chicken-and-egg analogy applies. Women in the ranks look up and see hardly any role models. Disheartened, they leave the industry. Bank chief executives, badgered by the diversity lobby, search for suitable women to add to their boards and find few who have top-level experience. In fact, I can think of only three women who are running divisions in investment banks: Mary Callahan Erdoes, Jane Fraser, and Sallie Krawcheck.
Does it matter that there are few senior women in finance? There aren’t many female air pilots or female taxi drivers and I haven’t read any opinion editorials in erudite financial journals bewailing this deficit. Indeed it would be interesting to compare the gender data for another well-paid, high-stress, long-hours profession: management consultancy. All one can ask for is that talented women who want to reach the top in banking have the opportunity to do so. And that their advancement is not hindered by antediluvian, chauvinistic prejudices.
Ironically, I am now a firm believer in the view that: "It’s the men not the women, Stupid". Women’s networks are impotent because women don’t have the power in the industry. You have to work through the men to advance the female cause.
An interesting example of my view is the recent reorganization at JPMorgan Chase, which involved a senior female banker. In June, chief executive Jamie Dimonannounced another senior management reshuffle. The reorganization was pitched to the press as a move to smooth succession planning by broadening the operational experience of a select few. The Wall Street Journal quoted Dimon: "People should try different jobs. At the end of the day, the board will make a decision about succession." Michael Cavanagh, who has been JPMorgan’s chief financial officer since 2004, moves to run JPMorgan’s treasury and securities services business, succeeding Heidi Miller(frequently dubbed a "long time ally" of Jamie Dimon from his Travelers Group days). Miller herself becomes president of international, tasked with identifying opportunities for the bank’s expansion outside the US. This is a new role: its reach sounds grandiose but, in reality, may be granular. Doug Braunstein, a seasoned investment banker, will become the CFO.
What are we to make of all this? As regular readers know, I am cynical and rarely believe the glossy overlay that overpaid public relations specialists spin. When Obama was elected and the Democrats ascended the Hill, it was rumoured that Dimon had aspirations to leave the private sector and become a future Treasury secretary. Since then, Wall Street and Main Street have fallen out spectacularly and it is extremely unlikely that one of Wall Street’s own would be summoned to serve. Dimon, who has been chief executive since December 2005, has started to talk more about succession planning. But I think that is the last thing on his mind.
Certainly Heidi Miller has risen with Dimon. However at 57 she is older than Jamie (54) and thus unlikely to be considered a candidate to run the firm should Jamie hang up his abacus. Dimon has initiated an internal jobs merry-go-round in the past year – remember last autumn’s reorganization prompted by the decapitation of Bill Winters, the former co-chief executive of JPMorgan’s investment bank. It could be argued that none of Dimon’s inner circle have been in their current jobs long enough to have a rock-solid track record. Could it be that by moving senior people around, Dimon reinforces the firm’s dependence on himself?
Compare this with other organizations: James Gormantook the top job at Morgan Stanley but had never worked in the institutional securities business, Brady Douganwas promoted to run the Credit Suisse group but his background was investment banking, Vikram Panditwas a senior investment banker before he was chosen to run one of the largest retail banks in the world: Citi. Do the brightest people, as potential leaders normally are, need lengthy management apprenticeships? Can’t they rise to new challenges on the job?
I see the recent Morgan reorganization as an exercise in procrastination. Jes Staleyhas been head of the investment banking division for less than a year; Michael Cavanagh, the departing CFO, has not run a revenue-generating group for six years; Miller is probably too old; and Braunstein, a former investment banker, has a huge amount to prove in his new CFO role. So where’s the threat to King Jamie? An impartial source grumbles: "The whole thing reminds me of Lehman Brothers at its peak. The brand had never shone so brightly and there was a coterie of cronies surrounding Dick. Erin Callan, who stepped up to the CFO role at the end of 2007, was also an investment banker!" Source may be too negative but ever since I wrote about the JPMorgan board in July 2009, I have harboured a nagging doubt about the firm. For 2009, JPMorgan achieved a return on equity of only 10%, which is poor when compared with Goldman Sach’s golden 22.5% or Credit Suisse’s creditable 18%! In my 2009 article, I highlighted how US-focused the board was. Part of the rationale Dimon offers for this latest reorganization is that Miller will "develop a comprehensive and coordinated international business strategy and growth plan". That’s good news but I’m still not sure this latest reorganization is anything more than pruning the tall poppies.
In July, I attended the 2010 Euromoney Awards for excellence party. Credit Suisse was named the best global bank, Deutsche Bank the best global investment bankand Vikram Pandit, chief executive of Citi, received the inaugural "banker of the year" award. Ironically, succession planning was a topic discussed by senior bankers who sat at the top table. One chief said that his most important task, in the next few years, was to groom a successor. This interested me because chief himself is young (early 50s) and as the global economy is teetering on the edge of a double-dip recession, I would have thought he had other things to worry about. Another senior banker expressed concern about the Obama administration’s apparent antipathy towards big business: the vendetta against BP being an obvious example. Before this conversation I had thought that the UK had fallen out of favour with the business community (a legacy of the Gordon Brown era). I now see that those running global organizations might be wary of the populist policies that Obama is espousing. It will be interesting to see how this plays out and whether London can resurrect its challenge to be the key financial centre, ousting New York, which today has that status. Perhaps, however, both New York and London are yesterday’s cities, at least when it comes to finance. In mid-July I was in Hong Kong and despite the fact that the Shanghai stock market is down over 20% this year, Asia is resounding with the rattle of ringing cash tills. In the second quarter of 2010, Singapore’s GDP expanded by 26%. I met some interesting senior bankers during my stay, including Richard Campbell-Breedenwho runs M&A for Goldman Sachs, Asia; Andy Jones, head of Asia Pacific capital markets, Barclays Capital; Jaspal Singh Bindra, head of Standard Chartered in Asia; and Owen Thomas, chief executive of Morgan Stanley in Asia.
One of the highlights of the trip was a meeting with Mike Geoghegan, HSBC’s chief executive, who is now based in Hong Kong. I always enjoy talking to Mike, whom I think has the best feel for markets of any of the bank chief executives I know. HSBC was one of the winners of the credit crunch war despite the fact that it was handicapped by the disastrous Household Finance acquisition – a leaving present from Geoghegan’s predecessor, Sir John Bond. The challenge for Geoghegan and his colleagues is can they win the peace? In order not to be viewed as quasi-utilities in this era of increasing regulation and higher capital requirements, banks need growth. HSBC, with its strong emerging market franchise, should be well positioned but it might need to make further acquisitions. A non-organic growth strategy will demand courage after the Household Finance Trojan Horse. Geoghegan will be tested: he has to add value without overpaying. I will watch developments at HSBC during the second half of 2010 with interest.
Finally, I want to end as I began: with women, or rather one woman in particular. Another highlight of my Asia trip was the meeting with Kate Richdale, Morgan Stanley’s co-head of investment banking in Asia-Pacific. Kate, who has worked at Morgan Stanley for 10 years, is delightful: balanced, bright and brimming with life. Kate told me that there are many senior women at Morgan Stanley: for example the new CFO, Ruth Porat. An interesting question is could Kate end up running investment banking globally for Morgan Stanley? In other words, might a US bank one day have a global head who is not only female but based in Asia?
What do you think? How was your month? Please send news and views to email@example.com