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Management Strategies

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If Bank CEOs Deserve $xx Million Per Year, CIOs Should Be Paid 1.5 Times That Amount

I just checked my list of top 142 bank CIOs, and I don't know any of them personally. So rest assured, no one paid me to write this blog. In fact, no one paid for any of the previous 225 blogs. I'm on my own here.

I just checked my list of top 142 bank CIOs, and I don't know any of them personally. So rest assured, no one paid me to write this blog. In fact, no one paid for any of the previous 225 blogs. I'm on my own here.The reason I have so much faith and confidence in today's CIOs is partly because too many other bank guardians dropped the ball when things got tough in the banking business. Risk managers saw the forest but didn't know which trees to cut down. Underwriters wanted to come out from behind (Have you ever met an underwriter face-to-face?) and join the movers and shakers, so they approved good ol' boy loans. Compliance officers governed according to a manual created by a regulator who never worked for a bank, focused entirely on a customer's loans without regard for the credibility of assets. Auditors were comfortable sending out confirmations by the millions, and never asked for more than "Is the amount you owe us correct?" Directors took the free lunch, the fee, the nap, and the glory because they trusted one guy who turned out to be the wrong guy. Too many CEOs were the wrong guys, except as the fall guy on "60 Minutes." The regulators rubberstamped what the outside auditors validated. The outside auditors forgot all about Enron and Arthur Andersen and followed the "lightning cannot strike the same place twice" myth. In other words, every guardian was doing mechanical work by the book and according to the way it has always been done without regard for the rule that every good CIO lives by-What if...

I am therefore an advocate of giving the guardian job to the CIO, and putting the bank's money where the risk is. Here is the ROI case for the big salary:

The job of CIO requires a significant degree of native intelligence. Intelligence means: • Give every alternative a fair shake • Evaluate alternatives based on a proven science • Calculate implementation reliability • If you follow a leader, make sure you're not wearing a blindfold • Challenge the "Madoffian Miracle 12" • Monitor every decision to make sure it is still correct • Look out the window a lot to see if there are better ways of doing last year's solution • Listen to your department skeptic who everyone makes fun of • Be alert to and skeptical of "too good to be true" • Kill a bad decision early Would packaged investments that no one understood have passed his scrutiny? Would subprime loans have stayed on the books as long as they did? There are 110 more good traits that CIOs possess but you get the idea.

• The CIO "owns" the technology tools that good guardians should have used to safeguard the bank. Who better than the CIO and his staff to become the users of the tools? • The CIO has to be bold. I have been in a lot of CIO offices and have noticed their toys. I never saw a magic wand. The late George DiNardo (Mellon Bank) had the most toys and they were not subtle. The Prussian soldier helmet defined him.

• Twenty years ago, CIOs didn't know the business of their employers. Today, they are bankers first, CFOs second, and techies third or fourth.

• I don't know any CIOs who are salesmen, and that's a good thing. They don't make money for the bank; they keep the bank from losing money. How sweet would that have been in 2008 and 2009 if CIOs had an expanded role?

• A strong CIO is the most disliked guy among his peers because he doesn't deliver instant gratification to users. That's OK. How does a strong fixer kick butt if the kickee is his buddy?

• Good CIOs don't eat breakfast until 10:00 AM. They know that if all hell broke loose it would have happened during the posting and updating run. They live by Murphy's Law, and Murphy works hardest during the graveyard shift. The right guardian for any bank should never really be a happy guy.

So to summarize my premise, there are two reasons why the CIO is worth 1.5 times more than the CEO. (1) The people who the CEO assigned the responsibility to safeguard the bank failed. (2) The typical CIO has the mentality, experience, management skill, personality, energy and aptitude to keep the bank on a safe and sound track. If you need a model, look at Chase. James Dimon is a rare breed of CEO because he is part CIO. Do you wonder why he is the only survivor of the Big Four?

Disclaimer: With all due respect for my favorite people in banking, I didn't use the male personal pronoun and the word "guy" unconsciously throughout this blog. I used them for the sake of accuracy. There isn't one female CIO among the top 142, and in my opinion, there's something wrong with that picture.

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