UBS Chairman Colm Kelleher this week said he so admired the three-way public horse race to succeed now-outgoing Morgan Stanley CEO James Gorman that he wished to replicate it.
“Morgan Stanley was a bloodless coup,” Kelleher said Tuesday, according to the Financial Times, at a banking summit hosted by the publication. “I would love to get to the stage in the future where UBS can run the same playbook as Morgan Stanley and have a foreseeable and credible succession with a range of candidates.”
UBS CEO Sergio Ermotti, for his part, told a Swiss broadcaster his mandate, over the next three years, includes identifying potential successors.
"We need to have candidates that we can assess in the next few years; and it is part of my job to present an array of candidates to the board,” Ermotti told Bilanz.
For background, Morgan Stanley in October named Ted Pick as Gorman’s successor. But Pick’s ascent marked the culmination of a two-year slog that began when the bank named him co-president, alongside Andy Saperstein. To complicate matters, Morgan Stanley also named Dan Simkowitz co-head of strategy alongside Saperstein and appointed then-CFO Jon Pruzan as chief operating officer. Pruzan would leave in January 2023. But Morgan Stanley would retain Saperstein and Simkowitz even after Pick’s elevation, thanks in no small part to $20 million bonuses the bank promised all three.
It might be easy to conclude, upon reading Kelleher’s comments, that the UBS chair was engaging his “winter filter.” For those unfamiliar, this is a seemingly yearly ritual where, often in December and January, bank executives drop the standard veil of diplomacy and speak with unusual candor. (See, Jamie Dimon’s 2020 appeal to competing bankers to call him with tips on how JPMorgan Chase could boost its asset management profile.)
“My line is open,” Dimon said at the time. “If you’ve got brilliant ideas, give me a call. And if you’re a competitor investment bank and you bring the idea, you get the fee.”
Like Dimon, Kelleher has cultivated a penchant for bluntness. He’s the sort of executive who, by at least one account, would lock the door at the start of a meeting to encourage latecomers to be more punctual next time.
Looking at Kelleher’s history, the desire to set up a “bloodless coup” at UBS could stem from any one of three roots:
1. Kelleher may want UBS’s next CEO to get the chance he never got.
Let’s not get it twisted. In his previous stint at Morgan Stanley, Kelleher outlasted several executives seen to compete with him. But the battles weren’t a public, multiyear horse race. And, maybe, weren’t even battles.
Paul Taubman, a top dealmaker at Morgan Stanley who would go on to launch his own boutique operation, left the bank in 2012 after Kelleher was named sole head of sales and trading, a division they had run jointly.
When Kelleher was named Morgan Stanley’s president in 2016, Greg Fleming — another executive once seen as a potential future CEO candidate — left the bank. Morgan Stanley perhaps set the stage for Fleming’s departure when, months earlier, it narrowed his role to investment management. Fleming had once also overseen wealth management, too. Those responsibilities went to Kelleher — though Kelleher told the Financial Times in 2020 there was “no rivalry” between he and Fleming.
In retrospect, it seems the only Morgan Stanley executive Kelleher couldn’t outlast was Gorman.
Kelleher was named Morgan Stanley’s CFO in 2007 and helped keep the bank afloat through the financial crisis by aggressively running down the balance sheet, negotiating a $9 billion lifeline from Japan’s MUFG and tripling Morgan Stanley’s cash position.
“I would have liked to have been CEO without a doubt,” Kelleher told the Financial Times in 2020.
Kelleher added that he “was lucky in the way I was promoted” but that Gorman was named CEO in 2009, and that the two were roughly same age.
Kelleher’s realization that “I wouldn’t be CEO” became reinforced when “James was doing an exceptional job,” he told the Financial Times.
In Kelleher’s last three years at Morgan Stanley, he and Gorman found an exceptional partnership wherein Gorman’s expertise in wealth management worked in tandem with Kelleher’s background in trading.
Kelleher ultimately left in 2019, when he “was absolutely convinced we were going to have another recession,” he told the Financial Times. “I did not want to be in Morgan Stanley in a position of seniority with another recession, not because I couldn’t have done it but because … I wanted to leave with my career at a high, my flags flying, my arms kept [up] as I marched out of the fortress.”
With all of this said, it is unlikely that Kelleher wants to adapt a 2021 Morgan Stanley succession sweepstakes to UBS for the spectacle of it.
“I never confused the job with the status of who I am,” Kelleher told the Financial Times.
2. Kelleher may see a lot of himself in Ermotti.
“Sergio has a lot of life in him but he’s not as young as some people,” Kelleher said Tuesday, according to Bloomberg.
Kelleher may also be thinking of his own mindframe, circa 2019, with regard to recession. Banking sector observers may be pinning the odds of a recession in 2024 as less likely than previously thought. But, he noted, 2024 won’t be as easy — so to speak — as this year at UBS.
“The easy losses are getting rid of headcount, the sticky ones are allocated in control functions, data, IT,” Kelleher told the Financial Times. “2024 is the first year we don’t have the cover of the ‘easy’ costs.”
The idea of a succession runoff at UBS isn’t new, Kelleher told the publication.
“I discussed it at dinner with Sergio when he agreed to come back,” he said.
Ideally, Kelleher said, the shortlist of potential successors to Ermotti would contain three names. Kelleher told Bloomberg he’d prefer to promote people from within “because that is a validation of a culture.” But, he told the Financial Times, he’d also consider external hires to bolster competition.
Ermotti told Bilanz an internal successor would be ideal.
"When the bank is successful, it is better to have someone who knows the internal mechanisms,” Ermotti said.
3. Kelleher may like the idea because he still has a fondness for Morgan Stanley.
Kelleher’s preference for internal promotion may stem from his penchant for loyalty. Anecdotally, The Wall Street Journal reported, during Kelleher’s time at Morgan Stanley, he referred to rival JPMorgan Chase simply as “Chase,” implying only one bank was worthy of the “Morgan” name.
Later in his tenure at the bank, Kelleher would turn down offers to become CEO at Barclays and Lloyds, according to The Journal.
Kelleher told the Financial Times in 2020 that he only considered leaving Morgan Stanley once — in 2001, potentially to follow the bank’s then-CEO to Credit Suisse.
But “at the end of the day, if you move jobs you become a bit of a professional gunslinger,” Kelleher said.