Leading with Values in Finance
Janice Ellig, CEO and founder of Ellig Group, sits down with real leaders in this series of game-changing conversations, bespoke to fellow champions of change. Heralded by Bloomberg Businessweek as one of “The World’s Most Influential Headhunters,” Janice is often consulted for her expertise and her commitment to gender parity, equity, inclusion, and diversity.
We are honored to present this month’s episode of Leadership Reimagined, “Leading with Values in Finance” with Ranji Nagaswami, Chief Strategy and Chief Commercial Officer at SVPGlobal. Discussing as to why the imperative to find values-based leaders in the finance industry is so vital for society, she shares, “As a values-based leader, you think a lot about the premise in which you make decisions. Values-based leaders examine the decisions they make AND their leadership style.”
Tune in as Ranji encourages listeners to consider her strong fundamental belief that the power of finance can be used as a force for good and how the centrality of the finance industry for human progress has grown. Ranji contends that successful business leaders “can use their personal success to impact society at large” and “to really think about leadership values and how a values-based system can help solve the greatest business challenges of our time.”
A 35+ year leader in the asset management industry, Ranji’s career has been at some of the most admired firms in the investment business – UBS Asset Management, AllianceBernstein, HirtleCallaghan and now at SVPGlobal. Ranji is in that small pool of women portfolio managers who has invested client capital and is one of the very few to hold a position of Chief Investment Officer and a Chief Executive Officer. Ranji Nagaswami is a Henry Crown Fellow at the Aspen Institute and Founder and Lead Moderator for the Aspen Finance Fellowship program.
It is with great privilege we present to you this episode of Leadership Reimagined “Leading with Values in Finance” with Ranji Nagaswami.
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Show Notes: Ranji Nagaswami
Ranji Nagaswami on her formative years
I grew up in the dusty suburbs of middle class India. And hard to believe perhaps now, but I was a shy and wonky kid with a geek’s passion for my studies and also for performing. Being a dancer growing up in India in the 60s and 70s was rather like being a collegiate-level athlete in the Western world today. I was so focused on my performance and being ready to dance and practice the next day that I missed many aspects of a normal childhood. And for me, it was just practice, practice, practice. I spent my summer vacation studying the entire curriculum on my own for the following year with my sister’s old textbook so that I could dance rather than go to school. It says a lot about the focus and discipline that set me up for a lifetime of being able to work really hard. Likewise, my focus on peak performance and commitment to being excellent at anything I attempted. The first inflection point in my life was a debilitating injury during a two-hour solo recital that pretty much ended my dancing performance career. I had grown up in a family of business people with extraordinary parents. My dad led a global business unit for an Indian conglomerate. And my mother, who was so ahead of her times, was an entrepreneur in the advertising and public relations business on the national stage. Given the two of them, my instinct was to go abroad and study philosophy and economics. In the India of the 1970s, it was very unusual for a 20 year old woman to leave home and go abroad. And my father only agreed on the condition that I did something useful. So, no masters in philosophy for me. Only an MBA would do. And that is how I came to the US. To go to the Yale School of Management, which was actually one of the best decisions I could have ever made in my life. Small, fun fact: to this date, I believe I hold the title of being the youngest person ever to be admitted and to start at Yale School of Management (SOM.) I was 20 when I joined, and my entire class came together to celebrate my 21st birthday. So I was rather precocious. But looking back, I regret nothing.
Ranji Nagaswami on her early years in the investment industry
I fell back on my own abilities and a very special group of friends and classmates coached me even in my first year at Yale. And SOM is a very special place in my heart and in my husband Bo’s. All four godparents of our children, who are still so present in our lives, were classmates of ours. The school really protected me and took care of me, and I learned so much from that. You know, having grown up in India, the biggest thing I learned about being in the US and in the SOM environment was how to ask for help. And once I did, I recognized that in fact, the universe is conspiring to help you. And I have never forgotten that lesson from Yale. So in many ways, my peers were my role models.
As in all things, there are mentors in life who see something in someone and make a bet. I got into my career in asset management by talking my way – as a 20 year old first-year MBA student – into a program that was being held for Yale seniors by a Yale alum to get them interested in finance at what was then Chase Manhattan Bank. And I used my dean, my career development office, everybody to get me into that program, which launched my accidental career in asset management, where, of course, I have now thrived and never wanted to do anything else for the last 35 years. The early years were just sheer grit, throwing myself into new things, taking risks, raising my hand for complex assignments that no one else wanted, using what were then my superpowers – quantitative and communication skills – to be better prepared than most of the senior people so that I became the go-to source in meetings for the hard facts on a topic. And ten years after I started, first as a spring intern, then as a summer intern, and then as a full time student, at 22, I became the head of the very group that hired me and ran U.S. fixed income for UBS Asset Management. So it was fast, it was intense. And honestly, I think the ability to work within a meritocracy has benefited me throughout my career because it was almost never about what I looked like or how young I was.
Ranji Nagaswami on working in the Bloomberg mayoral administration
Those were two fascinating years. I committed a year to the Mayor because I had verbally accepted a leadership position at a major asset management firm. He talked me out of that position and into coming to work for him. And, of course, I stayed for two years. When I got to the Bloomberg administration in 2010, everyone was tense and at loggerheads following the great financial crisis. The administration, unions, the controller’s office where the CIO sat, all were laser-focused on the pension fund. Why? Pension costs had soared from one and a half percent of the New York City budget when Mayor Bloomberg first took office to 8% of the budget in 2010. And my analysis within the first six to eight weeks of my joining showed that it would be 12% if we didn’t do something about it. We had to change what we were doing. Most importantly, we assumed the system, like all public pension funds, has an actuarial rate of return, an assumed rate of return that has no basis in economic theory because it does not presume any volatility. It assumes you earn that return year after year after year. And that return in 2010 was 8%. And my office’s research showed that the reality was closer to 6%. But in order for us to move from eight to six required a massive increase. That’s why 8 going on 12% of the city’s annual budget was being directed to a pension contribution. The prospect of increasing the already high contribution to pensions was really scaring everybody. If they’d taken a vote, I probably would have been the least popular person in City Hall and with the unions for the first part of my job there. But the truth was that everyone would have to give a bit. And that is indeed what happened. I went around for the first year with a 100-page deck, and I had the one-page version, the ten-page version, and the 100-page version, which I used depending on the individual patience of each of the 59 trustees. This is an extraordinarily complex system with six different pension funds: fire, police, teachers, employees, Board of Education, and so on and so forth. And I spent hours, sometimes at a bar, sometimes in a taxi, most often in a conference room with each trustee, with each consultant, with the controller, with the mayor’s office, with multiple people within the administration, because we needed to restructure, we needed to restructure the risk taking and the portfolio. We needed to restructure the benefits. We needed to restructure the city’s budget because they would need to find where and how to fund this, which meant fewer services for taxpayers. Due to the complexity of it, many, many people were involved. My role was really on the investment side. I’m really proud of the work everybody did, restructuring the asset allocation, reducing the assumed return, renegotiating benefits. And the good news in this is that thanks to Mike’s extremely strong moral compass, he never wavered from funding the commitment. Many public governments stopped funding, for example, the State of New Jersey. Mike never did. He always said this was a social contract, and we honor our contracts.
That front row seat on Mayor Bloomberg’s team was invaluable, in that I got to watch Mike as a leader navigating the extraordinary economic pressures. It was a time of tremendous racial tension and union resistance. It takes a lot to manage the world’s greatest city.
Ranji Nagaswami on founding the Aspen Institute’s Finance Leaders Fellowship
So in 2005, I became a Henry Crown Fellow at the Aspen Institute. Aspen’s founding philosophy, one that thrives 70 years later through its fellowship programs, is to drive change through dialogue. This is a Socratic dialogue based on timeless readings that go back to Martin Luther King and Gandhi, but also to Plato and Aristotle, to think about leadership values and how successful business people can use a values-based system to help solve the greatest challenges of our time. For me, this was an invitation to hit the pause button. I had been successful. I was CIO of Alliance Bernstein’s retail mutual fund division. But this fellowship caused me to reflect deeply on my leadership, my values, and perhaps most importantly, on my personal responsibility for using my professional success to impact society at large. The fellowship for me served as a transformative wakeup call. So in 2016, after years of working closely with the Aspen Institute and a few like-minded global finance industry leaders, we launched the Aspen Finance Leaders Fellowship program.
So what does the Finance Leaders Fellowship do? And why did I spend years working with others to found it? My belief from my time in government with Mayor Bloomberg’s administration, was that what we needed in finance was to develop values-based leaders to consider the values and perspectives needed to use finance to build The Good Society. This comes down to my fundamental belief in the power of finance as a force for good. The finance industry’s centrality to human progress has grown. Financial systems have deepened, global connectedness has increased. And yet we have also witnessed the business practices of the finance industry having the potential to devastate society during the global financial crisis and in other episodes since then. So clearly, we need to restore trust. And this restoring of trust can happen via regulation and vastly stepped up monitoring of the finance industry’s practices. I believe the real deficit is an insufficient number of values-driven leaders in the finance industry who want to use their power, position, tools, and treasure to grow the industry’s profits, but in a manner consistent with and supportive of the Good Society. So today, Finance Fellows has 82 fellows from 20 countries. We are the most global fellowship at Aspen. We launch a class every year, so there are now four classes. We took a break due to COVID last year, but we’ll launch a fifth class this year. And I couldn’t be more proud of the 82 fellows, who are leading exceptionally difficult, complex organizations. I hope these will be the role models who lead the industry in the future to use finance’s power to help human progress.
Ranji Nagaswami on compassionate capitalism
I am an unabashed free market capitalist at heart. I absolutely see the central purpose of business as driving human progress through job creation and income generation. That comes from having more jobs, creating wealth, and reducing risks. Reallocating risks to those who can take it, from those who don’t want to take it, and will pay the risk takers. I so admire the innovation and creativity, particularly in a society like the US, that inspires entrepreneurs to do highly risky things that could cause them a lot of grief in life. And I’m all for the profits that act as the incentive for these very special people to do those risky things. And – it’s not a “but,” it’s an “and” – businesses operate in a societal context. Businesses have a societal license to operate. And how they operate matters to society. Think of it as an implicit social contract. We, as in, society, protect a business through patents, legislation, and courts. And businesses provide us products and services we need and pay for. And we expect businesses to pay labor fairly to produce those goods and services. And we’ve seen way too many times that businesses that veer off the path of creating value in society inevitably lag, get disrupted or go bankrupt.
I have also run many of these businesses, and by the way, there are few things I love more than building a business. Businesspeople have to do very difficult things so we don’t get disrupted, because making profits takes continual reinvestment and innovation. There’s a lot of cyclicality – you can go up and down for reasons you don’t control. Business leaders have to make tough decisions all the time. Sometimes it is to lay people off, shut down plants, stop offering a service that people care about. And this is where values come in for me. You see, I think it matters as leaders what we decide. What we decide can affect employees, vendors, communities, society. But equally, it matters how we decide. And that very quickly becomes about what a leader values in their decision-making and whom they listen to in making that decision. We talk a lot, for example, about giving feedback to employees, and companies sort their employees into the top 30%, middle 60%, and bottom 10% of performers. And I was talking to a very important CEO, who said, “if someone is an underperformer in my division, I automatically terminate them, because there is no room for bottom performers.” I was on a panel questioning this leader and I said, “implicit in that automatic termination then, Mr. CEO, is a belief that this person has nothing of value to contribute, that it is your judgment as a leader that in fact, if you’re at the bottom, you don’t belong. Is that because you believe inherently that humans cannot be trained? Humans have no value if they don’t do the one thing they were hired to do? What if instead you believed that they might have value? That instead of that you might even put them on notice that they are underperforming, but you try to see if they’re a better fit in a different job, you get them new skills so that you don’t have yet another unemployment statistic, but a real human engagement and the chance for someone to course-correct.” I’m using this as an example; I don’t know how many people automatically terminate the bottom 10%, but it’s out there. As a values-based leader, you would think more about the premises on which you base these decisions. Values-based leaders really examine the decisions they make and their leadership style. We must understand the core assumptions we are making when we set policies about human nature, about the role of business in society. And there’s a huge difference in approach and outcomes when that happens.
My lens is finance. And of course, within finance, asset management. And finance and asset management place shareholders at the apex of everything. In investing our Limited Partnership (LP), those representing the savers of society, whose hard-earned savings we are investing, trump all else. Because when an LP gets set up, they fire an asset manager who’s not making money for them. But LPs also exist in the context of society, in our times. And let me assure you, LPs are wielding that power to have important conversations with General Partners (GP) like SVP that are about many more things in addition to how we make money for them. They care that we keep making money for them, but they care about our policies around the environment, social practices, governance, ESG. They care about sustainability. They care about us building a diverse and inclusive firm.
So I think there is a societal conversation that is going on around the world. And the Europeans, in some ways, got to this 5-10 years before we did here in the U.S., particularly around matters of the environment. But all of these societal needs and this societal context requires leaders to think deeply about what they believe and how they want to use business as a force in society.
Ranji Nagaswami on Leadership and DEI
I believe that leaders need to step up boldly to see this moment, not just in finance, but in all businesses, as an opportunity to strengthen human progress. We need bold solutions to address the challenges that we face. The COVID shock is stark evidence that crises of any kind require strong leaders to formulate holistic solutions. We must balance health, social, and financial demands. We have to move beyond climate risk management toward much closer alignment with climate outcomes. We have to create opportunities for innovation and investment in climate-resilient infrastructure. So, to be blunt, I think businesses have to look for new business and financial models to accurately assess and formulate strategies to reduce costs of climate change. Despite the ever-growing business case for diversity, inclusion in finance is underwhelming. There was a survey done of the largest asset managers. Black employees account for a mere 6% of the workforce, compared to 13% in the U.S. population. 7% are Hispanic compared to 19%, and only 24% are female. Women, of course, are half the population, so there are always problems. But I think the problems in society that we face right now require a generation of leaders who see it as their purpose to use their platforms as investors to drive change in society. When we look at the arc of our lifetimes, we can go back a lot longer than that, even. But in the last 50 plus years, who are the world leaders we think of who have shaped society in pace with progress. For me, it’s people like Martin Luther King, Margaret Thatcher, Ronald Reagan, Lee Kuan Yew. I can go on. And there are scores who have not been in the limelight – we may not agree with them on their methods, but we must agree that these are individuals who stepped up and accepted responsibility to make a difference that shapes the narrative and course of human progress. And that’s why I spent all those years creating the Finance Leaders Fellowship, first by myself and then joined by an extraordinary co-founder and many others at the Aspen Institute. That’s why I spend my time getting successful business leaders at SVP and through my Aspen work to think about how we, as business leaders, create, commit to finding new business models to do that while making profits. Making money for clients at SVPGlobal is job number one. I’m thrilled to be at a firm that has actually generated so much in excess returns for clients relative to benchmarks and to peers. So I’m very proud of that, and that is job number one. But we also have a moral imperative, as we have discussed repeatedly at the firm, to use our businesses to drive the needed change that I have just talked about in terms of ESG.
Ranji Nagaswami’s parting words
Many proposals will surely be needed to improve the odds that business, but in particular my industry, the finance industry, remains a force for good. I personally place the greatest hope for the future of finance, in nurturing values-driven leaders who are unwaveringly driven, unwaveringly committed to direct the industry’s business practices, the industry’s culture and its products and talents to serve society and shareholders. To me, this is an end in itself. We need to make finance work for everyone in society. We need to make business work for everyone in society. Without that strong leadership, restoring that connection may prove elusive. It will be hard, if we don’t have values-driven leaders, to imagine a finance industry of the future that will avoid the problems of the past. So if I have one thing to leave you with, it would be that nothing important and worth doing is ever easy, and it does not come quickly. A values-based framework that has, at its core, a set of leaders who see themselves driving our institutions with a long time horizon is actually what is needed. So I am optimistic. I am a true believer that we learn and we grow. But for me, I place the highest hope in leaders who commit to a deep personal transformation. It begins with awareness, a transformative awareness of leaders thinking through who they are and how they can use their power and position for good in their businesses and in society.
