The Co-CEO problem: Who's in charge?

"I didn't do it! It was him!"

When one of our industry’s biggest and best-known firms announced earlier this month that it?will now be led by two Co-Chief Executive Officers, they made headline news. But what most of those news stories didn’t tell us is that this specific firm has taken the co-chief model to another level. In addition to its newly appointed Co-CEOs, the firm has Co-Chairmen, Co-Chief Investment Officers, Co-Heads of the Investment Engine, Co-Chief Investment Officers for Sustainability, Co-Heads of Americas Region and Co-Heads of Client Service and Marketing. They also have two Presidents (curiously though, they are not called Co-Presidents). It is very confusing. Many with chief titles?but no one is in charge.

Don’t get me wrong. A strong CEO should be backed up by an even stronger team. A CEO will need a trusted CFO and so on. But he or she does not need a Co-CEO.?

Storytelling and corporate governance go hand in hand. Fund managers that want to attract the right kind of investors that will allocate to their funds for the long-term, need to have an organisational set-up that makes sense and that can be part of?the storytelling used?to communicate with potential and existing investors. Proper corporate governance requires that there is someone in charge, someone that is accountable. With a system of co-chiefs, no one is in charge and accountable. It is a set-up where it is very easy to shift the blame to “the other person” and it allows people in an organisation to play office politics.

Looking at co-chiefs in asset management and financial services as well as any other industry, the anecdotal evidence is crystal clear: it never works. No one wants two leaders – not the leaders themselves, not the staff, not the shareholders... These co-chief appointments tend to be based on compromises and politics. They hint at?an organisation that is indecisive and too afraid to make the tough calls. Those are not typically traits that investors want to find in their asset managers. Co-CEOs may (and should!) raise red flags when investors do due diligence. Someone needs to be in charge, not least when things go wrong and investors want answers and decisions need to be made. I predict that investor demands will slowly make asset managers abandon the poorly thought-through idea of co-chiefs. In 2022, asset managers need to listen to investors. 2007 happened 15 years ago. Wake up and smell the coffee!

Stefan Nilsson is a director of single-family office Terrasias Capital. He is also the founder of the Hedge Funds Club, an APAC-focused network of hedge fund managers, investors and other alternative investment professionals founded in Tokyo in 2005. www.hedgefundsclub.com

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