‘Wreckers’ left stranded by need for new morality

It is no easy time to be a leader. The higher echelons of organisations, both private and public, are faced today with three key challenges. 

First they must respond to a brutal war at the centre of Europe, and ensure their investments and activities are subject to proper governance and are no longer connected to aggressive regimes such as Russia, which until its invasion of Ukraine in February, was still seen as a key member of the global family of nations. This challenge has marked a huge acceleration in the discipline of environmental, social and governance (ESG) principles and investments.

Second, they must show economic and business expertise in order to face a new reality, where globalisation is waning, supply chains are fractured by a combination of conflict and populism and rampant inflation and labour shortages are beginning to define life in the post-covid era.

Thirdly, they must inspire staff, many of whom are affected by war, by inequality of opportunity despite a social revolution which promised change, and convince them that there is a brighter way forward in both business and society. 

Successful leadership was identified in the 1960s by US professor and presidential adviser Warren Bennis as “the capacity to translate vision into reality”. Many of us look at the leaders around us and ask which ones provide the best visions to lead us out of the current period. They look at the ‘builders’, the ‘wreckers’ and the ‘maintainers’ who populate the boardrooms and presidential palaces for an example on how to lead.

Unfortunately, the wreckers have recently been in the ascendancy. The likes of Donald Trump, Boris Johnson and Marine Le Pen specialise in destroying institutions which have taken decades to build. They concentrate on creating a chaotic environment from which they promise new structures will miraculously emerge. This is a wholly unrealistic expectation and approach.

Illusion of progress

“Their brand of populism aims to harvest the resentment in their  societies. After initial sugar highs, their policies fail under their own contradiction,” says Amin Rajan, CEO of the Create-Research consultancy and adviser to both political and business leaders. “Their stale soundbites create an illusion of progress while undermining the very fabric of their societies. Under Donald Trump, the US has ended up as a hugely divided country with weakened social and political institutions.”

There is also a fourth category of leaders which Mr Rajan feels is particularly prevalent, more so in the asset and wealth management industry. These are the ‘deniers’ and their influence or lack of it can be just as drastic for the investment industry as that of the ‘wreckers’.

“The deniers are evident in politics and finance alike,” says Mr Rajan. “They avoid making tough decisions for fear of rocking the boat while they are at the helm.  They prefer a quiet life at the expense of social progress. They prefer status quo and go out of their way to avoid the limelight.” 

Power of data

Today’s war, economic crisis and inequity are highlighting the lack of moral leadership and its importance to business and society. 

Publicly, leaders of banks and investment houses espouse the ethos of shareholder value. They are in reality still servants to quarterly capitalism. But privately, as we see among politicians deciding where to buy energy and bankers discontinuing lucrative relations with yacht-owning ‘oligarchs’, they admit maximising shareholder or voter value must involve moral choices.

But our report card on leadership standards is not altogether negative. Matthias Schulthess is a former UBS private banker who runs financial industry headhunters Schulthess, Zimmermann and Jauch. His frequent contact with the c-suite of asset and wealth managers reveals a more resilient, robust and pragmatic decision-making process than in previous eras, with data often powering the chosen path. 

The provision and analysis of this data clearly remains a critical challenge to enable successful management. “Today’s leadership teams understand there is no place to hide,” believes Mr Schulthess. 

“It’s about quickly defining and assessing  data points and making decisions with an incomplete set of information. This is now an almost constant requirement for executive committees.”

Great resignation

Leaders in the wealth management industry agree that this is the most challenging period most have faced in their working lives. While their focus shifted to implementing sanctions on February 24, when Russia invaded Ukraine, their daily work has been influenced by a number of over-arching goals. 

These have included dealing with climate transition and digital transformation. The need for both has been highlighted by managing the return to office life after the Covid pandemic and the associated ‘great resignation’, where key staff have re-assessed their working lives and decided they want to head in a new direction.

Many of these believe that maximising profits, minimising costs and moral leadership should no longer be mutually exclusive. There is even an expectation emerging that those firms failing to deliver this formula will not survive. There is increasing talk in the financial world about ‘stakeholder capitalism’ as a goal for ESG investors.

Overcoming challenges

According to research from Create, this concept is “yet to break the sound barrier”. In reality, there are few leaders who know how to balance the diverse aspirations and expectation of their shareholder and the society that surrounds them. As if there were not enough challenges, this pre-requisite will soon become the over-arching quality demanded of the modern-day leader. 

As Mr Bennis taught us 60 years ago, only humanistic, democratic and flexible leadership can cope with the complexity of change.