Bank Boardroom Battles Put Powerful Chairmen in Spotlight


Nicholas Comfort and Steven Arons Bloomberg March 5, 2020

(Bloomberg) -- First was the stunning power struggle atop Credit Suisse Group AG. Then cross-town rival UBS Group AG named a new chief out of the blue. Now Standard Chartered Plc is quietly looking for one.

Barely a week passes these days without a European bank chairman ousting a chief executive officer or seeking potential new ones. The turmoil has engulfed the boardrooms of almost all of the region’s top firms, from Germany’s troubled lenders to Switzerland’s large wealth managers, France’s investment banking powerhouses and London’s financial giants.

The turnover speaks to the dire state of European finance more than a decade after the financial crisis and almost six years into the region’s controversial experiment with negative interest rates. But the frequency and the speed at which top executives are being swapped out, at times over the vocal opposition of large shareholders, underscore another key difference with Wall Street: The powerful role of chairmen.

“There’s been a quite a lot of churn,” said Stilpon Nestor, who advises companies on governance at Nestor Advisors. The chairmen “are playing a more active role. The big governance changes after the crisis aimed at exactly that: giving more power to the board.”

Unlike their peers on Wall Street, where CEOs frequently also hold the position of chairman, European banks separate the two roles fairly strictly. Regulators made that a legal requirement after the financial crisis showed the need for more checks and balances, although there are exceptions. The European Central Bank built on that by telling boards that it expects them to challenge management on the implementation of strategy and culture.

Today, about two-thirds of CEOs at U.S. financial companies are also chairman of the board, most prominently Jamie Dimon, who has run the biggest Wall Street firm for the past 14 years. In Europe, that number is just 1%, according to data from the responsible investment arm of Institutional Shareholder Services.

The strengthening of the board has encouraged chairmen to take a more active role and move more decisively to replace top executives when needed. At Deutsche Bank AG, supervisory board chairman Paul Achleitner is on his fourth CEO in eight years at the lender during which he has overseen a long series of unsuccessful turnaround efforts. Credit Suisse has the third CEO since Rohner took over in 2011.

Achleitner’s Backseat

However, in a sign that a backlash may be brewing, both chairmen are facing mounting opposition from key shareholders unhappy with their performance. Achleitner has become a lightning rod for many long-time Deutsche Bank investors after overseeing a long decline in the stock. Several stakeholders were debating last year whether to push the Austrian out.

Now Achleitner -- one of the best-connected executives in Germany -- is taking a backseat in discussions with some shareholders in an effort to defuse tensions, according to people familiar with the matter. He’s been making fewer public appearances, with CEO Sewing taking a more active role in communicating with backers, the people said, asking for anonymity to discuss private meetings.

Deutsche Bank declined to comment.

“A lot of people actually wonder whether the pendulum has gone too far with the board assuming more and more executive decision-making responsibilities and the CEO becoming less and less responsible,” said Nestor. “This is a real concern in some banks.”

At Credit Suisse, Rohner has draw the ire of David Herro, a major shareholder who supported Thiam and said it was a mistake to replace a CEO over a spying scandal, given that he had just completed a successful turnaround of the lender.

“We think there is great potential in Credit Suisse and we would hate to see it ruined by a chairman who is not on the same page of shareholder value creation as we are,” he said last month. “If he really loved the company, he should step down and resign.”

At UBS Group AG, Chairman Axel Weber recently poached the CEO of Dutch lender ING Groep NV to replace Sergio Ermotti, one of the longest-serving European bank CEOs, as shareholders look for new ideas to maintain the bank’s edge in wealth management. But tensions had been brewing for some time at UBS as well, with Weber saying more than a year ago that the bank was starting to look at potential CEO candidates.


Ermotti’s Move

Weber, who has been chairman of UBS since 2012, has said the search for his own successor will start next year. That search became more complicated after Ermotti, who was seen as a potential candidate for the chairman role, on Tuesday agreed to join reinsurer Swiss Re AG instead -- a move that suggests he wasn’t entirely happy about his departure from UBS.

At Standard Chartered, Chairman Jose Vinals has informally approached banking executives this year to gauge their interest in taking over from Chief Executive Officer Bill Winters, according to people familiar with the plans who asked not to be identified. His search is not currently part of any formal selection process, the people said.

Winters had a public spat with investors last year after some opposed the bank’s compensation policy, saying that shareholders’ criticism of his pension award was “immature.” While Standard Chartered eventually cut his retirement allowance, the chairman was not happy with Winters’s public handling of the situation, some of the people said.

‘Increasingly Complex’

HSBC Holdings Plc, meanwhile, removed CEO John Flint last year, citing an “increasingly complex” environment. Chairman Mark Tucker and Flint clashed over style, with Flint focused on cultural issues at the firm and Tucker taking a more data-driven approach, people familiar with the matter have said.

Tucker named Noel Quinn interim CEO, but he has yet to find on a long-term replacement, a task complicated after UniCredit SpA’s Jean Pierre Mustier dropped out of consideration for the role. Now pressure on the chairman -- the first outsider ever hired for the role at the 165-year-old institution -- is ramping up after a steep share price decline following a Feb. 18 strategy overhaul that failed to impress investors.

The bank chairmen “know that investors are increasingly prepared to vote against them, so there’s a lot of explaining they have to do on the management changes,” said Ingo Speich, head of sustainability and corporate governance at Deka Investment, which holds stakes in European banks.

Whether chairmen are ousted ahead of time or not, the wave of change ultimately won’t stop at the CEO level. At Deutsche Bank, Achleitner’s second five-year term ends in 2022. The current term of HSBC’s Tucker will expire at the bank’s shareholder meeting in 2021.

‘Next Transformation’

Rohner, who has been on Credit Suisse’s board since 2009, will see his term end in April next year. The bank on Thursday denied a report in the Financial Times that he is seeking to extend his tenure, saying there is an orderly succession plan for a replacement.

The chairmen have accompanied banks through far-reaching overhauls but their successors will face another set of challenges. That’s especially true for the necessity to adapt their business to higher environmental, societal and governance standards, a paradigm shift similar to that of the automotive industry, says Speich at Dekabank.

“European bank chairmen have been an anchor of stability in recent years, but they’re getting older and asking themselves about where the journey’s going,” said Speich. “We need to see that generational change in order for banks to manage their next transformation.”