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BlackRock firing: Wiseman’s exit shows moral compass leads way

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Via Financial Times

For years BlackRock’s Mark Wiseman was among a handful of senior managers tipped as potential successors to Larry Fink, chief executive of the world’s largest asset manager.

Mr Fink had played a key role in the 2016 recruitment of Mr Wiseman to oversee BlackRock’s roughly $300bn active equities business. When he joined, the BlackRock chief highlighted his experience running the Canada Pension Plan Investment Board, one of the world’s largest and most sophisticated pension funds, as a boon for BlackRock’s sprawling investment empire.

On Thursday, Mr Wiseman’s hopes of one day leading the firm crashed after he was fired for having a relationship with a subordinate. In a further blurring of the boundaries between the personal and professional, Mr Wiseman’s wife also works at BlackRock. Marcia Moffat joined a year before her husband and remains at the firm, where she leads its Canadian business.

Mr Wiseman, a hockey-loving Canadian, leaves BlackRock after three years leading its active equities unit, a struggling corner of the company. During his tenure he has pushed to slim down the number of fund managers and analysts in the group and incorporate more computer-driven tools. He also chaired BlackRock Alternative Investors, a private equity and hedge fund business, which this year launched the Long Term Private Capital fund.

Mr Wiseman is “a very talented individual” and his departure is a loss for BlackRock, but the group’s depth of management will cushion the blow, said Kyle Sanders, an analyst at Edward Jones.

The dismissal of Mr Wiseman followed that in July of Jeff Smith, the company’s chief human resources officer, for an unspecified violation of company policy. Both men sat on BlackRock’s global executive committee and their departures mark a rare shock to the elite group of two dozen internal leaders that govern the $7tn fund manager.

The departures also challenge external perceptions of the corporate culture Mr Fink has helped build since founding the firm in 1988 and which he commonly promotes as a selling point.

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They come after Mr Fink last year warned members of the executive committee that their conduct would face added scrutiny given BlackRock’s desire to act as a beacon of good corporate conduct. BlackRock’s assets under management give it a prominent role in supporting or blocking board decisions across the thousands of listed companies in which its funds invest. Mr Fink’s annual letter to chief executives has become required reading across corporate governance circles.

“BlackRock has an outsize weight in what it says and what it does,” said Matt Orsagh, director of capital markets policy for the CFA Institute. “They are one of the biggest voices and their actions speak louder than others.”

The firings signal that Mr Fink “is putting everyone on notice,’’ said Greggory Warren, an analyst at Morningstar.

“I don’t think this is just a BlackRock problem — it’s the nature of power,” Mr Warren said. “You have to credit BlackRock for sticking to their moral compass and saying this will not be tolerated.”

The firings come in the wake of the #MeToo movement, which has exposed sexual harassment and abuse in the workplace and has transformed conduct that may have gone unchecked — in the past — into an acute business risk.

BlackRock’s relationships-at-work policy requires staff to report romantic relationships with colleagues to their managers and the HR department “so any concerns about fairness and/or conflicts of interest can be addressed,” according to a company spokesperson.

Other companies have stricter rules, including McDonald’s restaurants, where managers are barred from relationships with subordinates. That rule led to the firing of Steve Easterbrook, the company’s chief executive, last month. The chief executive of Intel, which takes the same approach, stepped down last year after the company was informed of a relationship with an employee.

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Now some pension funds are leading a nascent trend to incorporate specific requests for sexual misconduct information when they conduct due diligence on asset managers. Funds include the $326bn California Public Employees’ Retirement System and the University of Texas/Texas A&M Investment Management Company.

The public nature of these pension fund assets means they are sensitive to unsavoury conduct. In one recent example, a group of US pensions pulled a combined $3bn from Fisher Investments in the weeks after lewd remarks from founder and chairman Ken Fisher. He has since apologised for the comments.

“It’s a different environment in corporate America with the MeToo era,” said Mr Sanders of Edward Jones. “There’s a lot more sensitivity than there was in the past.”

Mr Fink and Mr Wiseman first worked together on Focus on Capital for the Long Term, a corporate governance think-tank, where Mr Wiseman was founding chair when the group launched in 2013. Mr Fink remains a strategic adviser, while the organisation’s board will decide on Mr Wiseman’s role in due course, a spokesman said.

Mr Fink told the FT last week that Mr Wiseman’s departure “has nothing to do with succession planning and I’m not going anywhere”. Yet the firing slims down the deep bench of would-be successors that Mr Fink has developed.

Mr Wiseman was seen as one of the front-runners among the seven leading internal contenders at BlackRock for the role. It’s a group that includes Rob Kapito, the company’s president, and Mark Wiedman, a former Treasury official who led its iShares family of exchange-traded funds through a rapid expansion in recent years.

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“Succession is top of mind for Larry and for BlackRock investors,” said Mr Sanders, from Edward Jones. “With a change in CEO expected in coming years you don’t want a candidate with skeletons in their closet.”

Additional reporting by Lindsay Fortado

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