Wall Street's Diversity Gap Highlighted in Morgan Stanley CEO Succession

May 22, 2023 : According to corporate governance experts, the absence of women among the potential successors for Morgan Stanley’s CEO position highlights the need for cultivating and retaining diverse talent. Currently, the front-runners for the CEO role are Morgan Stanley co-presidents Ted Pick and Andy Saperstein, along with the head of investment management Dan Simkowitz. James Gorman, the current CEO, announced his plans to step down within a year.

Data from the most recent workforce diversity report by Wall Street banks reveals that women are underrepresented in leadership positions at Morgan Stanley compared to other top U.S. banks as of 2021. Morgan Stanley reported that women held 25% of executive and senior management roles in the U.S.. In contrast, JPMorgan Chase & Co had 29%, Bank of America Corp had 36%, and Citigroup Inc had 38%. Only Goldman Sachs Group Inc had lower female representation among major peers at 23%.

Furthermore, Morgan Stanley has a higher proportion of white leaders in the U.S., with 80% of top positions occupied by white individuals, compared to other banks reporting representation between 67% and 78%. A representative from Morgan Stanley declined to comment on these findings.

Mary Beth Gallagher, the director of engagement for Domini Impact Investments LLC, which considers environmental, social, and governance (ESG) factors in its investments, emphasized the importance of building a diverse talent pipeline to identify diverse leaders. This would involve recruitment and career development efforts to ensure the right individuals with the necessary skill sets and decision-making authority are cultivated for leadership positions.

It should be noted that Morgan Stanley does have women in top roles, such as Chief Financial Officer Sharon Yeshaya, who is one of three women on the 14-member operating committee. Additionally, there are four women on the 14-member board of directors and four directors who identify as ethnically diverse. However, a Deloitte study from last year revealed that across the financial industry, women held only 21% of services board seats, 19% of C-suite roles, and 5% of CEO positions in 2021.

The financial industry, including Wall Street, has long struggled with its reputation as an “old boys’ club.” In recent years, banks have made efforts to improve diversity, driven by the desire to attract millennial workers and in response to social movements such as #MeToo and Black Lives Matter. A significant milestone was achieved in 2021 when Citigroup appointed Jane Fraser, previously the president, as its CEO.

Doug Chia, president of consulting firm Soundboard Governance, referred to the lack of diverse senior leaders at Morgan Stanley and other companies as a “classic pipeline problem” that limits the pool of candidates for higher-level positions. Chia emphasized the need to put more effort into attracting diverse candidates when the existing pool is insufficient.