Morning Coffee: When banks are intentionally nepotistic, and Goldman Sachs and the downward pay race

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Nominative determinism” is the theory that, at a greater rate than can be explained by pure chance, people seem to end up in jobs which are somehow appropriate to their names, like dentists called Dennis or the British jurist Lord Chief Justice Judge. In finance, Barclays used to have the finest examples when Bob Diamond’s top management team included Rich Ricci and Jerry Del Missier (“Missier” means “Miser” in French).  But that title might have been taken, as we can see from this interview with senior board members Eric Syz and Suzanne Syz, as they discuss the careers of two of the divisional heads at their workplace, Marc Syz and Nicolas Syz.  As if it wasn’t enough of a coincidence to have four people with the same surname working together, their employer is called ... Banque Syz!  What are the chances?

A joke, of course; Banque Syz is a Swiss family business.  Eric is the founder (strictly speaking, one of the three founders, but the non-Syz partners departed a while ago), Suzanne is his wife and Marc and Nicolas are their two sons.  This is actually a quite recent development, though; Mrs Syz was only appointed to the board at the start of this year, while the junior Syzes, were only relatively recently promoted into leadership roles. (Nicolas Syz didn’t even initially want to go into banking; perfume was his first love, until he realised that finance could be just as creative).  The current CEO is not a family member – Yvan Gaillard was promoted from Deputy CEO in February as the founder moved into a “strategic vision” role.  But the expectation seems to be the Nicolas in particular is being given a chance to demonstrate his suitability for the role, and the top job seems to be his to lose.

If you want to get ahead at Banque Syz, then, it clearly helps if your surname has three letters and ends in a Z. This isn’t always ideal; although Mr Gaillard made it through, non-family employees of family businesses know that there are limits to their ambitions.  And although Eric Syz claims that Suzanne “asks all the questions that nobody else does”, it’s notoriously difficult to get objective discussions of corporate strategy when the decisions being taken are embedded in personal relationsips. As the partners of C Hoare & Co say, after three hundred years of experience, “there’s two things that can destroy a family business – the business, and the family”.

On the other hand, in the words of Mr Syz senior, “clients always like to talk to someone whose name is on the front door”.  The incentive to avoid scandal or reputational risk is surely much greater when the name of the bank is your own.  And the question of objective advice can work both ways – board members might be tempted to ignore questions asked by a non-executive from outside the banking industry, but they can hardly do that when it’s the founder’s wife.  It’s interesting to note, though, that when it comes to the really important things in life, like their art collection, Mr and Mrs Syz have chosen to rely on professional advisors from outside the family.  The heirs, apparently, might be “brought into the fold” there, but only “at some point in the future”.

Elsewhere, compensation per employee is falling across the industry, with Goldman Sachs showing the steepest decline; average comp is down 61% from its 2007 peak.  This doesn’t really mean that Goldman employees have suffered the most, while HSBC bankers (down 9.1%) have been relatively protected, of course.  For one thing, Goldman salaries had further to fall because they were higher in the first place – the numeric majority of HSBC staff are low-paid retail bankers in emerging markets.  And for another, the figures aren’t adjusted for business mix – as Goldman moves into business lines where you have hiring fairs in shopping centres, obviously the comp/employee ratio is going to be lower than when it was exclusively recruiting from elite universities and business schools.

That said, the good days are definitely behind us, and even the Goldman figure is not wholly misleading; David Solomon’s pay for 2018 was $23m, almost exactly a third of the $68.5m approved compensation given to Lloyd Blankfein eleven years earlier.  No wonder he does those DJ gigs as a side-hustle.

Meanwhile ...

Sometimes in corporate PR, you just have to sit there and bear it even though it’s not your fault.  It looks as though PwC handled this rather sad case about as well as they could have done, but when one of your employees is found with 1,700 upskirt photographs on his phone, you just have to accept that the Google News results are going to look bad for a while. (Financial News)

On the other hand, it hasn’t all been bad news for PwC this week – record revenues and average equity partner compensation of £765,000 per head. (Evening Standard)

Another day, another senior departure at Goldman Sachs.  This time it’s Robin Vince, the Chief Risk Officer.  To an extent, it’s advantageous for David Solomon to be able to put his own stamp on the top team, but questions are beginning to be asked about the turnover and this is a specialist job which can’t really be given to an IBD loyalist with no role-specific experience. (Bloomberg)

Expenses fraud, skipping compulsory meetings and only coming in to the office one day a week – the things you can (probably) get away with if you’re a big enough revenue generator. (Finews)

Morgan Stanley have a robot that reads municipal bond prospectuses; apparently long prospectuses with lots of references to financial data are likely to be safe, while lots of mentions of the management team and their qualification are a sign of a risky project. (Bloomberg)

While “narrative economics” applies the same methodology to quarterly earnings presentations, and finds that the prevalance of the phrase “late cycle” tends to forecast cuts in capital investment.  One might have thought that a machine learning system which did nothing but read conference call transcripts would always forecast it was going to be a “great quarter, guys” but apparently they’re more sophisticated than that (Bloomberg)

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