What JPMorgan Can Learn From Morgan Stanley And Manchester United

(Bloomberg Opinion) -- Sir Alex Ferguson’s 26 years managing English football club Manchester United won him worldwide fame for success and leadership. He even became a Harvard Business School case study; when Ferguson visited the classroom, it was standing-room only. Unfortunately, when he quit in 2013, he remained as a director — a distracting influence, hampering his successors in the eyes of critics. A decade later, the club hasn’t got close to matching his trophy haul.

There’s a lesson here for long-term leaders: When the time comes, let go. James Gorman at Morgan Stanley has definitely learned it; Jamie Dimon and the board of JPMorgan Chase & Co. should reflect on it over the next couple of years.

Gorman will quit his executive chairman role at the end of this year, he said last week, having handed the chief executive officer job to Ted Pick in January. Moving on is the right thing to do to ensure that everyone at the bank knows who’s in charge. Gorman said as much when Pick’s promotion was announced: “Frankly, I shouldn't stay too long because it's Ted's job to run the firm now,” he told my colleague Sonali Basak on Bloomberg Television. 

Also last week, Dimon clearly signaled for the first time that the clock is ticking on his time at the top of the bank he’s led for two decades. In the past, he’s regularly said he’d likely be CEO for another five years. But the 68-year-old Dimon told investors the timetable wasn’t that long any more, although he raised the possibility of staying on as chairman for a while alongside the new leader.

Moving from CEO to chairman can help with a transition, but it tends to work when the handover is quick and clear — and the outgoing leader doesn’t hang around too long. No new boss wants to feel second-guessed by a former CEO, or by employees watching a former CEO for signs of approval or disapproval. A successor can be undermined easily if other executives can go around them to appeal decisions to the former boss, too.

This isn’t just intuitive; executive search firm SpencerStuart published research in December comparing the performance of large US companies that have an executive chairperson with those that don’t. The vast majority of executive chairs had either previously been the CEO or founder — and slightly more than half of those companies underperformed their peers. 

ore recently at Walt Disney Co., hugely successful CEO Bob Iger had trouble letting go, too, remaining as chairman for two years and reportedly questioning decisions made by his successor, Bob Chapek. Iger did finally move on, but then barely a year later, after Disney was battered by the pandemic and political battles in Florida, he returned to replace his successor. Such “boomerang CEOs” may be welcomed by the stock market, at least initially, but they are evidence that a company has fumbled the handover, as Bloomberg Opinion’s Beth Kowitt wrote at the time.

Walking away immediately is, of course, no guarantee of a happy succession. Jeff Immelt became chairman and CEO the second Jack Welch retired from General Electric Co.; Welch later deeply regretted his choice of replacement, telling the author William Cohan: “I f***** up.” 

Getting a handover right after a long spell under a singular leader is always tough. The outgoing chief should be consulted; they likely know what the business needs as well as anyone. But succession is the board’s job and its responsibility – not only in the moment of choosing, but also in supporting the new CEO thereafter.

Dimon has often said it is up to JPMorgan’s board how long he stays and who replaces him. The first part has always really been his decision; but the second should very definitely be the board’s. Investors will literally beg Dimon to stay but, when the time comes, if he does remain as chairman, they should beg him to look to Gorman and Ferguson — and not hang around too long.   

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times.

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