Morgan Stanley’s CEO succession underscores Wall Street’s diversity gap

May 21 (Reuters) – The absence of women from the list of potential CEO successors at Morgan Stanley ( MS.N ) underscores the importance of cultivating and retaining diverse talent, corporate governance experts said.

Morgan Stanley co-presidents Ted Pick and Andy Saperstein, and head of investment management Dan Simkowitz, are the frontrunners to succeed James Gorman, who said on Friday he plans to step down as chief executive within a year.

The latest U.S. workforce diversity data comprehensively reported by Wall Street banks shows that women were less represented in leadership positions at Morgan Stanley than at other top U.S. banks as of 2021.

Morgan Stanley said 25% of those holding “executive/senior officer/manager” roles in the U.S. were women, compared with 29% for JPMorgan Chase & Co ( JPM.N ), 36% for Bank of America Corp ( BAC.N ) and 38% for Citigroup Inc (CN). Among major peers, only Morgan Stanley’s arch-rival Goldman Sachs Group Inc ( GS.N ) had less female representation, at 23%.

Also, 80% of Morgan Stanley’s senior executives in the US were white, more than the others, which reported such representation at between 67% and 78%.

A Morgan Stanley representative declined to comment.

Mary Beth Gallagher, director of engagement for Domini Impact Investments LLC, which invests with environmental, social and governance (ESG) considerations, said firms need to have a pipeline of diverse talent if they want to find diverse leaders, which will involve recruiting and career-building work.

“The logic is to make sure you have the right people with the skill set and the decision-making authority. You have to have cultivated those leaders,” Gallagher said.

To be sure, Morgan Stanley has several women in top roles, including CFO Sharon Yeshaya. She is one of three women on the 14-member operating committee. There are four women on the board of 14 members and four board members who identify as ethnically diverse.

Across the financial services industry, women held just 21% of services board seats, 19% of C-suite roles and 5% of CEO jobs in 2021, according to a Deloitte study published last year.

Wall Street has struggled to shake off its image as an “old boys’ club”. In recent years, however, banks have made strides in diversity as they seek to appeal to millennial workers, and under pressure from social movements like #MeToo and Black Lives Matter.

A major milestone came in 2021, when Citigroup named Jane Fraser, formerly the president, as CEO.

Doug Chia, president of consulting firm Soundboard Governance, called the lack of diverse senior executives at Morgan Stanley and other firms “a classic pipeline problem” because it limits the pool of candidates companies can promote to senior jobs.

“If there’s a shortage of candidates, then you have to try harder” to attract them, he said.

Reporting by Ross Kerber in Iowa City and by Simon Jessop in London; Editing by Greg Roumeliotis and Rosalba O’Brien

Our standards: Thomson Reuters Trust Principles.

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