It has been an attention-grabbing scenario at one of the world's most visitble financial institutions. Now the London Stock Exchange is getting a new leader who will face a host of challenges.
Experts say industry disruptions like the ones facing David Schwimmer, the 49-year-old Goldman Sachs alumnus and soon-to-be CEO, are never easy, and will only become harder given the broader competition financial exchanges are facing across the globe. Indeed, few exchanges today have a lock on business the way they once did, and in the UK, the shadow of Brexit is never very far away from any financial institution.
To Shwimmer's advantage, the exchange has had a good run of business under the leadership of the interim CEO, David Warren (the firm's revenue rose 13 pecent in the first three months of 2018 compared to 2017). Still, experts say that the new CEO has a challenge of instilling confidence at a firm that hasn’t had a permanent leader for four months. “Having an interim CEO is never ideal,” says Stuart Brain, financial services lead for EMEA Private Equity at Korn Ferry in London. “In the beginning, you need to be seen to be getting to know people and doing activities to show people that you care and are willing to listen.”
Schwimmer will also of course have to gain the trust of the board and outside stakeholders, while also determining how the venerable exchange navigates in a post-Brexit environment. But doing that will be even harder if the new CEO doesn’t have a sense of his new employees’ loyalties, concerns, and abilities. “Only when you know what you have, where you are going, and how you are going to get there, should you focus externally,” Brain says.
Many stakeholders will be watching. The LSE, which can trace its roots all the way back to the 1570s, is at the center of Britain’s huge financial services sector. Under the leadership of Xavier Rolet, the exchange found a niche for itself as the world’s top clearing house for derivatives, and its stock price rose more than 17-fold since 2009. In late 2017, the exchange announced that Rolet planned to leave the firm at the end of 2018. But one of the exchange’s largest shareholders questioned whether Rolet was being forced out by the exchange’s chairman of the board. Last November, the governor of UK’s central bank got involved, and Rolet left immediately, and Warren was installed as interim CEO. (The board chairman will leave in 2019.) Market participants, including bankers and government regulators, will not want any new surprises, Brain says.
In addition to that drama, Schwimmer will have to fend off the tough competition that this changing industry faces. “Stock exchanges can no longer survive if all they provide is a corporate listing and trading solution,” says Alan Guarino, vice chairman of Korn Ferry’s CEO and Board Services practice.
The key to growth, says Guarino, is to embrace technology and become digital platforms that enable the capital markets. In one notable case, TMX, the company that runs the Toronto Stock Exchange greatly expanded its market data and analytics offerings to get away from relying on trading products. “Stock exchanges are a vital part of the safety, soundness and security of the markets. Every one of their challenges could actually be an opportunity for them to embrace and drive transformation,” Guarino says.