Bank CEO succession is the talk of Bay Street, but women are not likely candidates

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Canada’s biggest banks are on the brink of a round of CEO shakeups, and the chances that the next group of the country’s most influential Bay Street leaders will include a woman are slim to none.

More than 13 years ago, then-chief executive of Royal Bank of Canada Gord Nixon predicted that the next round of chief executive officers at the major banks would include the first female CEO. That round came and went without any progress.

Today, many of Canada’s largest lenders are setting the stage for a new round of succession in the coming years. RBC’s Dave McKay, Toronto-Dominion Bank’s Bharat Masrani and Canadian Imperial Bank of Commerce’s Victor Dodig are the longest-serving CEOs among their peers, each hovering around the 10-year mark in their terms – the typical tenure for a Big Six bank leader.

None of the three CEOs have signalled they are leaving any time soon. Mr. Dodig recently told The Globe and Mail that “there’s still more to do.” Mr. Masrani told analysts that he is “focused on strengthening the bank.”

But on Bay Street, speculation is swirling on who is jockeying for a spot on the list of contenders.

CIBC’s recent leadership shakeup set the chessboard with three contenders for the top job. TD is embroiled in an investigation by U.S. enforcement agencies, prompting speculation that Mr. Masrani’s days are drawing to an end. For RBC, investors think Mr. McKay may remain in his seat for longer as he is on the cusp of clinching a crown jewel with the bank’s takeover of HSBC Bank Canada, while also overhauling its strategy in the U.S. to address issues in its Los Angeles-based City National Bank.

Meanwhile, among the executive teams that run Canada’s biggest banks, there are fewer women in position to take on the top jobs than there were when Mr. Nixon made his statement in 2010.

The banks have lost a wave of senior female leaders – women who were once considered to be top contenders for the CEO seat. The lenders have published statistics and reports about the inroads they’re making on hiring and developing diverse talent, yet the efforts in recent decades have yet to yield a woman as a successor.

“When did the banks have their biggest cohort of potential women? It’s probably when I was running retail and wealth at CIBC,” said Sonia Baxendale, CIBC’s former head of retail banking who left in 2011 and is now CEO of the Global Risk Institute. “It feels like we have not made much progress at that point of the pyramid.”

In recent years, the number of women leaving the top ranks has outpaced the number moving in.

Last February, CIBC’s head of personal and business banking Laura Dottori-Attanasio left the bank to take on the CEO job at Element Fleet Management. Over the years, C-suite executives have left their posts without reaching the top job, including TD’s head of Canadian banking Teri Currie and chief financial officer Colleen Johnston, Bank of Montreal’s head of wealth management Joanna Rotenberg, RBC’s CFO Janice Fukakusa and chief operating officer Barbara Stymiest, and CIBC’s retail banking head Jill Denham and Ms. Baxendale.

Rania Llewellyn – who in 2020 became the CEO of Laurentian Bank of Canada, which is a fraction of the size of the Big Six banks – was ousted in September after a system outage.

The typical blueprint to reach the top corner office requires a mix of experiences. Canadian bank CEOs are expected to have run a major profit-generating business in the bank, such as personal and commercial banking or capital markets. A successor should also have experience in a corporate function, such as overseeing the bank’s risk or finance departments. In today’s banking market, in which most of the large lenders are eyeing the U.S. for growth, experience in that region is virtually a necessity.

“If you look at the career trajectory for the current CEOs … they’ve worked in many other divisions in the bank, so they have a full view of how different segments work together,” said Jiani Wu, vice-president of North American financial institution ratings at DBRS Morningstar. “When you look at suitable candidates for the next CEO, obviously someone with that full picture for understanding the business will be able to stand out from the crowd.”

Several leadership changes happened in 2023, setting the stage for succession. Since Bank of Nova Scotia stunned Bay Street in 2022 by forgoing internal candidates and embarking on the rare move of tapping a board member as CEO, investors have been keenly watching succession planning.

“All of the other boards saw the market’s reaction and what happened with Scotia, and this was a very dramatic lesson learned for everybody,” Jefferies analyst John Aiken said. “The market has a very distinct distaste for that. … Scotia found themselves in that position because they did not have viable candidates internally. Each of the banks are desperately trying not to fall into that position.”

In early March, CIBC launched a major leadership shuffle, moving contenders for the CEO job into roles overseeing key components of the bank’s growth strategy.

Chief financial officer Hratch Panossian will oversee personal and business banking. He has worked in roles in finance, treasury, enterprise strategy and corporate development, but he has yet to run a major profit-generating line of business.

As head of capital markets, Harry Culham – who has spent most of his career in that business – is taking on an expanded mandate, adding enterprise strategy and corporate development to his portfolio.

Shawn Beber, who took on his role as head of the U.S. region in 2022, will remain in that position. He has overseen both corporate functions and profit-generating businesses as chief risk officer and general counsel.

At TD, a high-profile executive departure in December triggered a shakeup in its C-suite. Head of Canadian banking Michael Rhodes – once considered a contender – left for the role of CEO at Illinois-based Discover Financial Services. TD tapped head of wealth Raymond Chun as Mr. Rhodes’s successor and promoted capital markets executive Tim Wiggan to lead the wealth business, placing them in the early stages to eventually be considered for the top job.

Investors have been closely evaluating TD’s internal talent bench. In 2022, Leo Salom became the head of the bank’s U.S. division – which has faced a turbulent year with the failure of the bank’s takeover of Tennessee-based First Horizon Corp. and a probe by U.S. regulators and law enforcement into anti-money laundering controls.

CFO Kelvin Tran has spent his career in finance, treasury and auditing functions. Riaz Ahmed became the head of TD’s capital markets unit in 2021, having previously worked in finance and treasury roles.

Even so, some on Bay Street are uncertain about TD’s pool of candidates as the bank undergoes a major strategic shift in its key growth market.

“Because of a dwindling of management experience at the executive committee level, there are a couple of banks that have fewer options than others,” Mr. Aiken said. “At TD, given the recent round of changes in the executive committee, there’s nowhere near the same level of experience as there are at some of the other banks. This is what is clouding some of the issues for potential succession once and if Bharat decides to step down.”

In response to an analyst question during TD’s first-quarter earnings call, Mr. Masrani said the bank has “a deep and highly experienced bench of senior leaders.”

RBC currently has the most senior leadership bench among the banks expected to see CEO office turnover in the coming years. Among those expected to be top contenders, Neil McLaughlin has been the head of personal and commercial banking since 2017 and expanded his role to include RBC Ventures in 2021. Head of capital markets Derek Neldner took on the role in 2019, and was recently given the task of overseeing a strategic overhaul in the U.S.

BMO’s Darryl White, who became CEO in 2017, still has many years of runway and closed a major U.S. acquisition last year with the takeover of California-based Bank of the West. In the following months, Darrel Hackett was named head of the U.S. business and Nadim Hirji was tapped as the head of North American commercial banking. Alan Tannenbaum was appointed head of capital markets in October.

Bank of Nova Scotia’s CEO Scott Thomson stepped into the role early last year, and National Bank of Canada’s CEO Laurent Ferreira was installed in November, 2021.

While there are no women on this list, there are some in the C-suites at banks; however, they tend to be placed in roles overseeing human resources and legal affairs. In key operating roles where boards develop potential CEO talent, representation among women is significantly lower.

Representation of women in senior executive positions at U.S. banks is slightly lower, and yet the sector named its first female CEO of a major lender in 2021 with Jane Fraser taking the helm of Citigroup.

The issue is not a lack of women working at the banks. While boards are responsible for selecting candidates, it is the CEO who identifies and champions prospective successors.

Over all, women make up 55 per cent of the financial services industry, but account for 38 per cent of senior management, according to a report by DBRS Morningstar. Women typically dominate the low-ranking and low-paying levels, and representation worsens among racialized groups, people with disabilities and Indigenous people.

“If they’ve got 35 to 40 per cent in those senior ranks, what is the issue? That should be enough,” Ms. Baxendale said.

“If the pipeline isn’t strong enough, it’s not because the women weren’t there. It’s because the organization failed to engage them, failed to mentor them, failed to sponsor them.”

There are a handful of women in key senior leadership roles, but their potential as contenders also depends on timing.

The candidates with the most runway are at the banks with recent CEO turnover.

National Bank appointed Lucie Blanchet as the head of personal banking in 2018 and Marie Chantal Gingras as CFO last year. BMO’s Erminia (Ernie) Johannson was tapped as head of North American personal and commercial banking in 2020. And RBC’s Jacqui Allard moved to Scotiabank for a promotion as head of wealth.

At the banks where succession is expected in the coming years, there are fewer candidates. In 2021, Nadine Ahn was named CFO at RBC after more than 20 years in finance roles. Last year, TD’s Barbara Hooper became group head of Canadian business banking after running the bank’s treasury division.

It typically takes years of on-the-job testing and networking in various roles to make it to the CEO chair.

“A characteristic of women – not all, but generally – is that we’re busy focusing on the organization and doing our job really well, taking on these problems that need to be fixed, while some of our male counterparts are busier networking, building relationships and positioning themselves,” Ms. Baxendale said. “It gets very heavily rewarded, and that’s how women get to some of the most senior spots. But for that final pinnacle, that’s not what is being sought.”

Every bank has its own diversity initiatives to support the development of women. For example, RBC set a goal to achieve executive representation of 50-per-cent women by 2025.

Women in finance are 20 per cent to 30 per cent more likely to leave their companies mid-career than their peers in other industries, according to DBRS. Those women typically cite inflexible work arrangements, a lack of transparent promotion processes and the gender pay gap – which forces them to prioritize their male partners’ higher-paying job.

“We have entry-level data on female graduates going into the industry, and they’re equally ambitious, equally well-educated, but at the end of the funnel, we see lower representation,” Ms. Wu said. “So, what’s really happening in the middle? That’s the missing part.”