Leaders believe in being decisive in judgement while displaying adaptability in volatile circumstances, according to the latest finds from PWM and the Global Leader Group.
All charts and statistics from the global leadership survey are available here:
Moral leadership, the findings suggest, is highly prized in a post-Covid world, wherein leaders continue to stress the importance of improved communication with staff and clients (see Fig 1 and Fig 2). But how far are leaders willing to go in practicing moral leadership?
Over the years, views on the responsibilities of CEOs of major companies have evolved. In 1970, Milton Friedman famously stated that the role of a CEO is to maximize shareholder value. This has evolved into broader and more emotive issues like diversity and inclusion (D&I), climate change, moving from just shareholder to broader stakeholders focus, including helping the communities they serve.
Now with the Russian invasion of Ukraine, and similar atrocities around the globe, do CEOs believe they need to be overtly on the side of social justice for the oppressed?
Respondents’ views are mixed on the role of leaders in leveraging their position for wider social issues.
Our 2022 survey of senior leaders in wealth management, asset management and, more broadly, financial services across the globe, of whom more than a third were women, focused on tangible issues like environment, social and governance (ESG), D&I, leaders’ skills in crisis, strategies for long-term success, essential personality traits, and the Russian invasion of Ukraine.
Leaders of tomorrow
Rather than assess what kind of temperament a leader should possess, the survey asks questions on how leaders can enhance their impact. In addition to being decisive and active communicators, leaders must have a strong moral compass to articulate the ‘why’ of the firm’s purpose and values, buttressed by providing the highest level of client care.
Surprisingly, caring for staff and avoiding scandals were all ranked low (Fig 3). Jonathan Nabrotsky, CEO of Global Leader Group, states that “wealth management is a noble profession, as its practitioners are financial doctors or lifeguards for their esteemed clients”.
Successful leaders, he notes, consistently give primacy to internal clients, the staff, then external clients and the communities they serve. The trait that distinguishes them is “taking a clear moral stand even when inconvenient in the short term”.
The survey also shows that diverse leadership continues to be regarded as important to a firm’s success. Roughly 80 per cent of respondents agree or strongly agree that fostering diversity helps prevent confrontation and crisis (Fig 5). As for the related goal of bringing about greater equality among employees, five factors stood out almost equally – growth, financial performance, cultivating individual potential, sense of belonging, and broadening the talent pool (Fig 4).
Ayesha Abbas, managing director at Standard Chartered Bank in the UAE, echoes the views of many when she says that firms need to do three things continuously: raise awareness, track progress and, most importantly, measure the percentage of women at all management levels.
On the negative side, preconceptions around D&I persist. There remains a lack of diverse talent, existing diversity programmes are primarily oriented toward reaching quotas, expecting diverse people to conform to the existing culture, and the belief that D&I initiatives should be handled by HR. An interesting implication of these results, however, is that D&I affects meritocracy (Fig 6).
Furthermore, clients are overwhelmingly demanding ESG products, crucial to the creation of a sustainable world. However, the deployment of ESG-related initiatives is work in progress. Paul Jourdan, CEO at Edinburgh-based Amati Global Investors, says that the adoption of ESG must include an emphasis on human rights. Others view ESG adoption as still being a mixed picture.
Opinions were varied concerning the effect of the Russian invasion on net zero emissions goals. Camilla Stowell, managing director at Coutts UK, believes this is a headwind that will only exacerbate poverty caused by climate change.
Howard Hammond, group head of consumer bank at Fifth Third Bank US, proposes a need for greater balance between short-term necessity and long-term well-being. We will need oil and gas for decades to come, he suggests, and alarmism about the climate is unhelpful.
David Chubak, president of wealth management at US-based firm Edward Jones echoes a majority view that there is short-term pullback, but long-term goals will be intact.
Moral imperative
Last year, we discussed the three traits of a moral leader: integrity, competence, and compassion (ICC). The survey illustrates that respondents believe competence is abundant and integrity is probably fine. Compassion, however, seems to be in short supply when it comes to sentiments toward the geopolitical quagmire in Ukraine.
This crisis looms large on the global investment landscape. Unsurprisingly, a majority believe this will result in increased investor scrutiny of their investments’ impact.
The moral dilemma has triggered varied responses to the Ukraine invasion by Russia. Eva Lindholm, head of wealth management UK and Jersey at UBS, suggests that “morality is the newest lens” for examining the conflict. Similarly, governance aimed at protecting freedom and democracy is viewed as more important now than before the Russian invasion of Ukraine.
To be sure, most respondents are trying to ensure that they comply with sanctions and strengthen due diligence on all clients. A minority maintain that they will halt, suspend or exit Russian assets while freezing Russian client assets.
When asked if the Russian invasion of Ukraine is a watershed moment for financial services firms’ risk assessment and governance, 37 per cent said ‘yes’, 35 per cent per cent said ‘no’, and 22 per cent said ‘not sure’ (Fig 7).
A marked variety of opinion was evident, too, among the few who declined to complete the survey, saying it is too Ukraine-focused, and that the world does not pay much attention to similar human rights violations committed by other major global powers. So what makes Ukraine special?
Wealth management leaders still have a duty to resist Russia’s oppression of Ukrainians. Leaders have an obligation to announce their opposition to the Kremlin’s atrocities and take whatever non-violent action is within their power. This will help shift the narrative from ‘not my corporate mission’ to ‘we are in this together’. Upholding freedom and the rule of global engagements benefits all stakeholders and all nations, large and small.
Serving communities
Assuming the mantle of moral leadership, senior management of financial services firms can redirect their focus toward all stakeholders, serving the communities in which they operate.
For a solid example of this, look no further than Acumen, a non-profit organisation based in New York that deploys ‘patient capital’ in the service of poverty relief. Ayesha Khan, regional CEO, Pakistan, says that even though Acumen operates in regions dealing with conflict, they consistently uphold human dignity in solving the hardest problems with which those at the bottom of the wealth pyramid are confronted.
Having strong moral lens is key to creating sustainable impact. For the wealth and asset management sectors, this will improve the mixed reputation of the industry, because of ongoing scandals. More recently, these were 1MD in Malaysia, Greensill Capital, Archegos Capital and others.
Moral leadership is caring about more than the bottom line, it is also about how the bottom line is generated. To that end, the survey shows that the financial services industry has the right focus, albeit it is work in progress.
Malik Sarwar is senior partner, Global Leader Group, USA
