Morning Coffee: Inside the race to replace Jamie Dimon. And why Bill Winters might take a pay cut
You need a lot of things to come together to build a successful investment banking franchise: the right people, the right market conditions, good luck in avoiding disasters and a friendly regulator (or at least, not an actively hostile one). But if the investment bank is part of a larger universal banking group, there’s one further resource that it vitally needs – the commitment and support of the CEO.
In a highly cyclical business, which isn’t always particularly popular with the general public and where individual salaries and bonuses tend to attract negative press, top management can expect that owning an investment bank will occasionally be a painful experience. And if it’s suspected in the market that the CEO might be tempted to take the easy way out when things get tough, franchise damage is inevitable.
Jamie Dimon at JP Morgan has been one of the best examples of this. There were plenty of times (remember the London Whale?) when the easy thing to do would have been to bow to pressure and cut back, but he never did. And JP Morgan has reaped the benefits of being seen as a stable place to work, where capital allocations are predictable and budgets realistic.
But Dimon is 63 years old and has been in the post for 14 years now, longer than any other big bank CEO. Although he’s not necessarily showing any signs of losing his powers, he’s reaching the point at which succession planning starts to become a matter of interest to shareholders and employees. And with Jennifer Piepsziak now in the CFO role, it’s interesting to look at the runners and riders for internal succession and ask whether they are likely to share the same strength of commitment to wholesale banking.
Pepziak traded jobs with previous CFO Marianne Lake, who is now the head of consumer lending and cards, and it’s generally assumed that in both cases the high-flyers were being given a variety of experience as potential preparation for the top job. Neither of them, however, have had a great deal of front-office experience in investment banking (Lake was controller in the investment bank from 2007 to 2009, which might not exactly predispose one to seeing it as a great business).
Daniel Pinto, on the other hand, is an investment banking lifer, having started as a forex trader in Buenos Aires in 1983. He’s clearly a valued lieutenant to Dimon, as reflected in his multiple titles (he’s co-President, co-COO and CEO of the investment bank) and his compensation. But he doesn’t seem to have been rotated into any of the retail banking jobs to “gain experience”. Might he be on track to join Bill Winters and Jes Staley in the club of ‘JPM investment banking heads who gave up on getting the top job’?
A less high-profile but apparently well-regarded candidate, though, might be Mary Callahan Erdoes, last year’s “Most Powerful Woman in Finance”. Although she’s currently the CEO of Wealth Management and has been for the last ten years, she’s an investment banker by training too. So it seems that out of the top four candidates, there’s a roughly 50/50 chance of getting a next CEO with a gut-level understanding of how investment banking works. That’s probably about as good as you can hope for.
Elsewhere, one of the past members of the Club Of Future CEOs of JP Morgan has run into some shareholder trouble and might have to take an expensive way out. Bill Winters at Standard Chartered has been writing an apology for calling shareholders “immature” in objecting to the pension element of his compensation plan, but now some of the key investors (possibly including Temasek which owns 16% of the company) are asking the bank to find a way to calm things down, and the board are apparently suggesting that one way to achieve this might be for the CEO to take a pay cut. If you ever wanted a graphic illustration of the reasons why people advise you never to discuss your pay in public, here one is.
It was always something of a long-shot, but Credit Suisse’s attempt to strike back against banker-bashing and sue the UK government for the 2009 bonus tax has failed. (Financial News)
Not necessarily the easiest route to an internship at Goldman Sachs, but the “athletes’ internship” has recruited Olympians, Paralympians and now the Tour de France cyclist Simon Gerrans. Apparently an elite sport background is a good preparation for the trading floor in terms of focus and dedication – you can tell which ones the athlete interns are on a slow day in summer, as they’re the only ones not watching sports on the TV. (Times)
London-based lawyers specialising in EU law are in danger of losing their rights to represent clients in the event of a hard Brexit, so many of them are taking the bar in Brussels or Dublin. (Bloomberg)
The battle against shareholder value continues, as JP Morgan opens up its internal activist-defence database, using machine learning to predict which shareholders are likely to side with activists based on their historic behaviour. More experienced corporate advisors worry that, as in electoral politics, companies might end up relying too much on Big Data rather than building relationships or, indeed, addressing the underlying problems. (FT)
The Jeffrey Epstein case promises to bring the names of “prominent individuals” in to court, although still no details about his involvement with hedge funds that anyone has heard about. (Bloomberg)
Barclays has asked former CEO John Varley to provide a witness statement in the case brought against them by Amanda Staveley over fees payable for the controversial Qatar fundraising. So far he’s refused and it’s not clear why. (FT)
Jerry Wiant, the American banks specialist from Lazard, has gone to Credit Suisse to lead coverage there. (Reuters)
If you’re thinking of an alternative career, there’s still money to be made in running pub quizzes. (Bloomberg)
Image credit: Robert Daly, Getty