Discover your dream Career
For Recruiters

Morning Coffee: What if Goldman Sachs, JPMorgan & Morgan Stanley chose CEOs like this? Private equity's pain

When chief executives are selected in investment banks, it tends to be a closed door affair. The outgoing leader chooses the next, and there is often some fallout. David Solomon's ascension at Goldman Sachs resulted in his unsuccessful opponent, Harvey Schwartz, joining Carlyle Group. Jamie Dimon's succession machinations at JPMorgan seem to have been partly responsible for Vis Raghavan's exit to Citigroup. Only Ted Pick at Morgan Stanley was chosen by James Gorman in a peculiarly bloodless baton-handing, although it remains to be seen whether Andy Saperstein and Dan Simkowitz will stay long as number twos. 

Get Morning Coffee  in your inbox. Sign up here.

What, though, if it were different? What if it wasn't up to the outgoing CEO to choose his/her successor (with help from the board), but if all the senior staff got to vote in a democratic process and candidates had to produce suitability manifestos to win.

This is what happens in large partnerships, where partners with significant equity in the business have a say over who leads them. It's what happens in the big accounting and professional services firms. 

“It can be a great laugh,” one Big Four veteran says of the process to choose a new leader. It's mostly because the candidates aren't much good at selling themselves, he tells the Sunday Times. "They can be stilted and out of their comfort zone,” he observes. Another insider says it's like, "being robocalled by a politician." 

Those calls are now happening. Elections are underway at PWC. The process is surprisingly open. The Times says any equity partner can apply to lead the firm: they simply nominate themselves to a supervisory board of senior partners. This board puts candidates through psychometric tests and interviews and eliminates the Count Binface equivalents to create a shortlist. The shortlisted candidates create a manifesto to sell their vision and gather supporters and voters with the aid of lunches and drinks. There are hustings and heckling, a panel discussion. And then a vote. 

Things don't always run smoothly - at PWC in the US last week, three partners were stripped of their management roles for breaching election rules. These set limits to campaigning to avoid disrupting day-to-day business. Nor can any old partner become the leader: only the heads of the biggest businesses are really eligible; others are weeded out by the board. For the most part, though, it seems a process designed to get buy-in broadly from the firm instead of simply foisting a great leader upon the people.  Given the poor Glassdoor ratings of some banking CEOs, this might be a helpful approach.

Separately, the Financial Times has looked at Bain & Co.'s new report on the state of the private equity industry and seen pain. 

Private equity (PE) firms make the money by buying companies and selling them on at a profit. Last year, however, they sold fewer companies than for the whole of the last decade. A backlog is developing: PE firms usually sell companies after three to five years, but more than 40% of the companies now waiting to be sold are over four years old. "It's going to be a multi-year issue," says the head of Bain's private equity practice. 

None of this looks promising for bankers moving into private equity and hoping to earn carried interest from successful exits. Ludovic Phalippou, a professor of financial economics at Oxford University, has long queried whether the private equity industry really makes the returns it claims to make anyway. In future it could be harder than ever. 

Meanwhile...

Staff in EY's UK deals business say they feel "deflated" and that trust is broken after job were cut and deals slumped. "Trust is broken and as soon as the market improves I would [sic] jump ship.” (Financial Times) 

Abrdn staff should be suspicious of the new CFO, who's an ex-banker. “Jason Windsor is a former M&A banker — he could have gone in to break the business up.”  (Financial Times) 

Problem banks in the US are up by 18%. Weak banks are up 52%. (Financial Times)  

Morgan Stanley will be keeping its office at Canary Wharf. There were fears it would give it up for something smaller. (The Times) 

Goldman Sachs is supposed to be growing its transaction banking business and yet is closing it in Japan. (Bloomberg) 

A former Barclays PR executive has written a novel about her time in banking. She's not sure whether it will prevent her from getting another job in the industry. She says working in PR gives you a good perspective on the personalities. "People see you as the agony aunt, if you like, because you are a direct report of the CEO.” (AFR) 

When you work for a Gen Z boss you'll get mindfulness Fridays and love heart emojis. (WSJ) 

AI can be used to analyse employee messages and work out the cause of employee frustrations. It discerned that the manager didn’t feel heard as the employee asked some of the same questions over and over. The employee, seeking as much clarity as possible, could sense a high degree of frustration. (WSJ) 

Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. Signal also available.

Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.) Eventually it will – unless it’s offensive or libelous (in which case it won’t.)

author-card-avatar
AUTHORSarah Butcher Global Editor

Sign up to Morning Coffee!

Coffee mug

The essential daily roundup of news and analysis read by everyone from senior bankers and traders to new recruits.

Boost your career

Find thousands of job opportunities by signing up to eFinancialCareers today.
Recommended Articles
Recommended Jobs

Sign up to Morning Coffee!

Coffee mug

The essential daily roundup of news and analysis read by everyone from senior bankers and traders to new recruits.