CEO Chips Away at Some of Bank of New York's Age-Old Conventions

03/07/18 09:44 AM EST
By Justin Baer 

As Charles Scharf settled into his first weekly sales meeting at Bank of New York Mellon Corp. last summer, the newly named chief executive thought there were far too many of his colleagues there.

Within weeks, the meetings were revamped -- fewer employees were invited and those that did were expected to participate. "It's true of everything," Mr. Scharf told The Wall Street Journal. "Meetings should have as few people as possible, but all the right people."

It is a familiar tenet to those who worked alongside Mr. Scharf at Citigroup Inc. and later JPMorgan Chase & Co., where he served for years as a top lieutenant to CEO James Dimon. Both Mr. Dimon and Citigroup's Sandy Weill leaned on a small cadre of deputies to overhaul businesses, with deputies that could often "finish each other's sentences" in rooting out bureaucracy, one former colleague said.

Mr. Scharf, who joined BNY Mellon in July, is turning to pages of the same the playbook as part of a broader overhaul. He already has laid off staff, consolidated office space and overhauled executive pay. His challenge is to kick-start the bank that has been mired by slow growth and price wars that have weighed on profit.

BNY Mellon completes some of Wall Street's most vital, if boring, tasks: connecting many of the world's sellers to buyers, tracking the value of securities and safeguarding trillions of dollars in assets. Yet many of those businesses still rely heavily on legions of operations employees. Alexander Hamilton, who founded the Bank of New York more than two centuries ago, "left for the duel and told the bank not to change anything until he got back, and they haven't," one former competitor said, recounting an old joke about the custody bank.

At an investor meeting Thursday, Mr. Scharf will outline his plans for change, and details on additional cost cuts are likely.

Of BNY Mellon's 53,000 employees, some 20,000 work in operations. As the bank moves to automate processes, in time "that number should be a fraction of what it is," Mr. Scharf said.

For example, BNY Mellon still receives 22,000 faxes a day, he said.

BNY Mellon aims to ride one of the biggest changes to affect the financial world in decades: the digitization of nearly every step that money takes as it flows through the global economy. Mr. Scharf is spending heavily in technology in an effort to better harness the reams of data produced by the assets they oversee. In January, he told investors that he would plow all of this year's benefits from the new U.S. tax rules -- some $250 million -- into investments in technology and employees.

And then there is the dress code. It is common for Mr. Scharf to arrive at work wearing black jeans.

That is just one example of the ways Mr. Scharf has shed some of BNY Mellon's formalities that, at times, stifled debate, executives said. Meetings and emails were often riven with corporate speak. When a team produced a memo ahead of a client meeting not long after Mr. Scharf's arrival, a document one executive conceded was "written for a different era," the CEO demanded a rewrite.

Mr. Scharf started his career at Commercial Credit Co. not long after Sanford Weill acquired the consumer lender.

In 1998, Mr. Weill fired his longtime protégé, Mr. Dimon, who landed on his feet at Bank One Corp. in Chicago. Mr. Scharf followed Mr. Dimon to Bank One, and then back to New York when J.P. Morgan bought Bank One. Mr. Scharf got one of the combined company's biggest jobs: running the sprawling consumer-banking division.

The similarities end there, though. Whereas Mr. Dimon is gregarious and prone to saying what is on his mind, Mr. Scharf is reserved and careful, former colleagues said.

"Charlie is very much his own man," said Ryan McInerney, a former J.P. Morgan executive who joined Mr. Scharf at Visa Inc. tapped as its president.

He got his first chance to run a company in 2012, when Visa tapped Mr. Scharf as CEO. Moving to San Francisco, Mr. Scharf completed the payments company's transition from a nonprofit association to a publicly traded corporation that shared its code more openly with banks and other users.

Mr. Scharf soon sought to spend more time back to New York to be closer to family, and in 2016, he stunned the industry by announcing his departure.

In December of that year, he had dinner with Gerald Hassell, then BNY Mellon's CEO.

Mr. Hassell was still dealing with the aftereffects of the financial crisis, which had upended BNY Mellon's business model. BNY Mellon's profit had shrunk, and in 2014 activist investor Trian Fund Management LP bought a stake in the firm and pushed for changes.

Mr. Hassell was successful in curbing expenses, but efforts to revitalize its technology systems were stymied by frequent delays. It also faced an embarrassing technology glitch in 2015 by vendor SunGard Systems Inc. that prevented the bank from calculating the closing prices on some 1,200 client funds.

The bank had previously laid out a plan to migrate clients from the SunGard system to its own, a conversion that is still years away from completion, people familiar with the matter said.

Mr. Scharf is eager to pickup the pace. He also has been careful not to move too quickly, sounding out some of his new colleagues on how to avoid alienating employees, people familiar with the matter said.

"Every organization can move at a different speed," Mr. Scharf said.

Write to Justin Baer at


(END) Dow Jones Newswires

March 07, 2018 09:44 ET (14:44 GMT)

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