- Bankers said to turn down StanChart, Barclays senior roles
- Worries include responsibility rules, history of misconduct
London’s banks that were once among the most coveted employers in the global financial system are struggling to fill top roles because potential penalties are seen to outweigh the perks.
Standard Chartered Plc has been seeking an external replacement for Chairman John Peace for more than a year. Barclays Plc has been hunting for a successor to oversee the investment bank since last year after Tom King made it known he wanted to retire more than nine months ago, according to people with knowledge of the plan who asked not to be identified as recruitment is private.
Bankers are concerned about regulations that could see executives thrown in jail for failing to spot serious misconduct on their watch, which has shifted the City of London’s reputation from a light-touch Babylon to a risky place to work. Combined with British politicians’ desire to name and shame, an unforgiving press and diminishing cash compensation, the nation’s banks have been left struggling to fill senior positions, lawyers and recruiters said.
“Top jobs at banks are very exposed nowadays, especially with grandstanding politicians out to humiliate them,” said Simon Morris, a lawyer at CMS Cameron McKenna LLP in London. “Markets are poor, dampening returns, the regulators’ increased risk-averse approach limits the gambles a bank can make and hence further the rewards for its managers.”
British lawmakers introduced the rules in response to public anger after many top executives of bailed-out lenders including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc received millions in compensation. Banks were also fined for a series of market abuses, including manipulation of the London interbank offered rate, that further undermined the reputation of the City, as the U.K. capital’s main financial district is known.
The searches face specific obstacles as well. Both banks are in the midst of turnaround efforts that will probably take several years and are pushing through thousands of job cuts. Barclays Chief Executive Officer Jes Staley and Standard Chartered’s Bill Winters both took on their own roles within the last year and have been working to set out new strategies.
Standard Chartered, which makes almost all of its profits in Asia, offered the chairman’s seat to former Australia and New Zealand Banking Group Ltd. CEO Mike Smith, only to be turned down, people familiar with the search said. Smith, 59, rejected the role in part because he didn’t want to relocate to London.
Barclays has contacted several senior investment bankers in New York about its opening, people with knowledge of the search said. Deterrents cited by potential candidates include a hardening stance of the U.K. government against banks, tough market conditions and disgruntled investors in Britain’s second-largest lender, the people said. Blythe Masters, who worked under Staley at JPMorgan Chase & Co., said in December she’s committed to her current job at a financial startup after Reuters reported Staley approached her to run Barclays’s investment bank.
“The risk and reward dynamic has shifted to make these roles far less appealing,” said John Purcell, founder and CEO of London’s Purcell & Co., an executive-search firm. There is a “culture of scalp-hunting, compensation restrictions, an onerous regulatory environment and consequent personal reputational risk. For these reasons, many senior executives are leaving the industry, compounding the problem by reducing the supply of suitably experienced candidates.”
Standard Chartered’s board has said it’s essential any nominee have knowledge of Asian markets as well as experience dealing with regulators, yet such candidates are in short supply, the people said. Peace is leaving his position this year and the board’s senior independent director, Naguib Kheraj, is leading the search.
Further complicating Standard Chartered’s task, fellow Asia-focused bank HSBC Holdings Plc announced March 18 it’s seeking an external replacement for Chairman Douglas Flint next year. The search is being led by senior independent director Rachel Lomax and Sam Laidlaw, head of the nomination committee.
“StanChart and HSBC are out there looking for new chairmen and it certainly won’t be easy to find successors, but they are out there,” said Hugh Young, Asia managing director of Aberdeen Asset Management Plc, which owns the second-largest stake in Standard Chartered and is HSBC’s sixth-largest shareholder. “We think Douglas has done a good job, but for any replacement candidate, unblemished records are nigh on impossible.”
Barclays’s board has hired recruitment firm Spencer Stuart to help it to fill the gap left by investment bank CEO Tom King, two of the people said. King, 55, left on March 4, ending six years at the bank, specifically telling colleagues he didn’t want to be subject to the so-called senior managers regime, which came into force the next business day, people with knowledge of the plans said at the time.
It’s likely the bank will name someone for an expanded role as head of the newly-formed Corporate and International bank, rather than as a direct replacement for King, a person familiar with the process said. Staley, who previously ran JPMorgan’s investment bank, told journalists in March the securities unit will report to him until a successor is found, with the lender relying on the current management team “for right now.” Staley is listed on the U.K. Financial Conduct Authority register as having ultimate responsibility for the conduct of the investment bank.
He’s had more luck filling other executive positions quickly, poaching C.S. “Venkat” Venkatakrishnan and Paul Compton from JPMorgan to serve as chief risk officer and chief operating officer, respectively. The CEO has said his recruiting pitch is “come and help me clean up this bank.”
Under the Senior Managers and Certification Regime, firms have to spell out to regulators the responsibilities of each senior manager, along with a blueprint that shows how their areas intersect. Also introduced last month was part of the 2013 Banking Reform Act that makes it a criminal offense to recklessly manage a bank to the point that it fails.
“The senior managers regime and other regulations have brought culture to the fore” in recruitment, said Jamie Risso-Gill, head of the consumer financial services at London search firm Per Ardua Associates Ltd. “The challenge for these big bank CEOs, for example with the Barclays vacancy left by Tom King, is they’ve got to get the behavior of their workforce right first, so they can then go to the market and say ‘look, we are fixing this and therefore you should come and work for us.’”