Morning Coffee: Morgan Stanley CEO changes his mind about in person meetings. A new way for Hong Kong banks to cut costs
As the old saying goes with respect to controversial issues, where you stand often depends on where you sit. Although he hasn’t been quite as vocal as Jamie Dimon on the issue, Morgan Stanley’s James Gorman is one of the investment bank CEOs who has led calls for employees to go back to the office, suggesting that those in-person interactions and new ideas make the difference between “Jobland” and “Careerland”.
It's been suggested a number of times in the past that CEOs think in-person meetings are productive environments for roughly the same reason King Charles thinks the world smells of fresh paint. Everything is organised ahead of their arrival to make them so. Of course people who go into a meeting with James Gorman are ready for a productive discussion on business strategy. Nobody is going to take up the last twenty minutes of Jamie Dimon’s meeting with an extended and rambling complaint about the email system. Even the “chance encounters” which spark new synergies are often planned and rehearsed weeks in advance by people who know they will only get one shot at engineering a fortuitous meeting by the elevators.
And it turns out that when the meetings aren’t set up in this way – when CEOs are there because they have to be, and they’re exposed to a cross-section of random nobodies who happened to turn up – James Gorman doesn’t enjoy them anything like as much. Morgan Stanley moved its annual shareholder meeting to a virtual-only format at the start of the pandemic, and it has no plans to change. Apparently, according to his comments on the second quarter analyst call, “It was an enormous waste of time and money, and while one or two people might like asking a question in person, I just don't think it's a good use of time and money”
Even the quarterly conference call is apparently a bit much; Gorman suggested that if he was the “god of finance” he would rule that twice a year is plenty often enough to publish results. He was speaking from the heart, it seems, as he also confirmed that he’s done his last annual meeting and that the successor – Andy Saperstein, Ted Pick or Dan Simkowitz, most likely – will be the one to waste his time with the shareholders next May.
Does he have a point? Probably yes. “This meeting should have been an email” is a meme that could practically have been designed for the quarterly and annual results shows. Three quarters of the time is spent literally reading out the slides and commentary that everyone received by email, and it’s extremely rare that the remaining period of “great quarter guys” question and answer sessions are any better. The only mistake that James Gorman might be making is to assume that the five meetings a year that he resents are anything other than typical.
Elsewhere, bankers at CLSA in Hong Kong have historically earned more than their colleagues in the rest of the CITIC Securities group, but those times might be coming to an end. The deal drought has hit revenues there as hard as anywhere else, and the parent company is offering an ultimatum to “dozens” of employees – relocate to mainland China or lose your job.
The relocation comes with a rebasing downward of base salary by 25-50%, and once the staff are there, they’re likely to be subject to the “shared prosperity” policy under which bankers are discouraged from conspicuous consumption and encouraged to display humility. In the first round of relocations, it’s only going to be a small (“single digit”) number of people affected, chosen based on a performance review, but in the medium term CITIC is talking about “dozens”; potentially as many as 80 out of CLSA’s 200 employees. Effectively, it looks as if all the China-related coverage for advisory and execution is going to be on-shored.
This looks like a whole lot of no fun for the bankers affected, but arguably it’s better than simply being made redundant without even the option to relocate. People are going to have to make a decision about the outlook for a recovery in the Hong Kong market; it doesn’t look like this is the sort of job move that’s going to be easy to reverse, but on the other hand it might not be easy to find an alternative right now.
Meanwhile …
The Credit Suisse layoffs have started in London, with 80 roles to be cut from the IBD team there by the end of July, including 17 Managing Directors. That’s 30% of the relevant employee pool, which seems a bit lower than might have been expected. (Financial News)
An interesting long-read about the relationship between Barclays and the Adani Group. On the one hand, a short-seller report has created a lot of bad news flow and raised a number of reasons to reduce exposure; on the other hand, nothing seems to have been definitively proved, and you don’t want to lose a “winner” in a competitive market. It’s causing internal tension which seems to be partly personal; Jaideep Khanna is the “speed-dial banker” for Gautam Adani, which is part of the reason that he’s the Head of Asia-Pacific. (Bloomberg)
It seems pretty scandalous that someone at the Bank of England got a £25m bonus while telling other workers not to ask for pay rises … oh no, hang on, that’s the total bonus pool for the whole staff. (Open Democracy)
When investment banking sneezes, the professional services firms usually catch pneumonia. The Big Four accountants aggressively hired into their consultancy arms during the deals boom, and now they’re facing falling revenues and lower “attrition” than they’d anticipated. Signs point to redundancies. (WSJ)
If you’re seeing “Oppenheimer” over the weekend, remember to nudge your date at some point to remind them that the Robert Downey Jr character was originally an investment banker. (Radio Times)
According to early leaks from the Goldman Sachs board meeting, it seems that David Solomon’s presentation of the new growth strategy went down well – perhaps surprisingly so given all the grumbling and griping ahead of the meeting. (Reuters)
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