Morning Coffee: Bank of America has a secret CEO replacement plan. Private equity's proliferation of perks
Now that James Gorman is heading off into the sunset at Morgan Stanley, people are looking at future successions. The never-ending “five more years” of Jamie Dimon have been well covered, but what about Brian Moynihan at Bank of America? At 64, he’s one year younger than Gorman and three years younger than Dimon; he’s in good health and has no immediate ambitions to seriously tackle his golf handicap.
Although Moynihan wants to stay on “for years to come”, he can’t be there forever, and there’s always the potential for a surprise event. So apparently the board has a succession plan in which “nothing is left to chance” and BoA is “always ready to go”.
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Does that mean that there is, formally or informally, a designated “under a bus, god forbid” candidate? Looking at the executive team, we’d guess that, for the moment, vice-chair Paul Donofrio would be in that position. But this doesn’t necessary mean he would be the natural successor in the long term – for that role, Jim DeMare has been doing himself a lot of favours recently, while Matt Koder has demonstrated leadership over the long term, and Cathy Bessant would be the choice if the board wanted a technology-focused candidate.
Whoever it is (and there might be outsiders in the running too), it’s a secret for now – BoA doesn’t want to start any unnecessary politics, and it doesn’t want to end up paying huge bonuses to calm down the disappointed. But the very fact that the questions are being asked means that people are going to continue to speculate.
Separately, what do you do with a dealmaker when there’s no deals to do? According to a survey of the private equity industry carried out by Preqin, you might as well give them a holiday. The average vacation has increased by one day for most ranks and two days for managers, while employee paid-time-off allowances are two days longer than they were in the survey last year.
This seems like a pretty obvious thing to do – in the current environment, you might as well adapt to conditions and let the workers enjoy themselves a bit rather than hanging around the office drinking subsidized coffee and wearing out the carpets. What’s slightly stranger is that this isn’t something that employers are handing out instead of pay and benefits; salaries, bonuses and perks are all significantly up.
Particularly for junior ranks, the majority of employees are getting at least some rise in basic pay (albeit in single rather than double figures), and nearly half of all firms are offering “performance shares”. And there’s also student loan repayments, subsidized meals and even “car insurance assistance”. All this in an environment when fund-raising is down on previous years and global deal values are down by a third.
What’s going on? Probably the same thing that’s making hedge fund “pod shop” owners like Paul Marshall of Marshall Wace complain about “silly money” and say that “everybody’s getting paid as if they were Cristiano Ronaldo”. Which is to say, the good old economic forces of supply and demand.
Talent is scarce, while money is plentiful. “Talent”, in this context, doesn’t just mean abstract intelligence, or a magical instinct, or whatever Ray Dalio thought he was measuring with a computer program. It often means the ability to get deals done, or to get the sense of the market, or to be someone that people bring opportunities to. Unlike some of the big sell-side banks, the buy side didn’t really over-staff during the boom, so they need to keep their teams intact as they wait for conditions to improve. It doesn't help that “carried interest” is down or non-existent. PE professionals are bound to be unhappy, so it’s in the interests of the employers to do what they can to dull the pain.
Meanwhile …
More on the story of Damien Couture, the trader who’s just too good to be allowed to trade. His former employer, Jump Trading, are asking the courts to enforce a two-year non-compete clause on him, including twelve months when he’s not allowed to do anything at all. (Bloomberg)
The Goldman Sachs HBCU Possibilities Program, aimed at recruiting from historically Black colleges and universities, has an extra incentive for the recruits – as well as competing for a job at Goldman, the best project wins a $1m donation to their school. (Business Insider)
When world events spill into the workplace, strongly held political opinions can be a massive source of tension between colleagues. Opinions seem to be divided about whether it’s better to talk it out, or to keep personal commitments out of the office. (FT)
Citigroup have paid a $25m fine for discrimination against people with Armenian surnames (Bloomberg)
According to the new book about “Bridgewater”, the official policy on hiring strippers for corporate events was that you had to refer to them as “Special Entertainment” when advertising to guests. (Business Insider)
It is surprising which brands people feel that they can still see some residual value in – Tom Farley, the former NYSE President is one of three separate bidders for the exchange business of FTX. (WSJ)
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